Question

1) XYZ Corp purchased group term life insurance for all of its employees. The employer pays all of the premiums which are equal to two times (2x) the employees’ salary.

Scott, age 52, earns $37,500 annual salary. How much must Scott recognize in income?

2) Don and Carol are married and filed a joint return. During the year they received the following :

Wages…………………………..   $25,000

            Social Security Benefits……….      12,000

            Tax Exempt interest income…...     10,000

            Modified adjusted gross income     35,000

How much of the social security benefits are included in income?

Answer 1

1

Taxable premium portion = 37,500*2 - 50,000 = 25,000

Taxable benefit = 25000/1000 * 0.23 *12= 5.75 *12 = 69

2

Ref	Particulars	Amount
	MAGI plus 50% of SS:
	MAGI	35,000
50%SS	Add: 50% of SS	6,000
	Total	41,000
	Less: base amount	(32,000)
a	First excess	9,000
b	Less: second base	(12,000)
	Second excess	-
c	Smaller of two a,b	9,000
d	50% of c	4,500
e	Smaller of d and 50%SS	4,500
f	× 85% of second excess	-
g	Add e,f	4,500
h	85% of SS	10,200
min(g,h)	Taxable benefits	4,500
	Tax exempt	7,500

Amount taxable is 4,500