Kobe is not a key employee of AB Corporation. AB provides Kobe with group term life...

Kobe is not a key employee of AB Corporation. AB provides Kobe with group term life insurance coverage of $100,000. The premiums attributable to the excess coverage are $1,950. The uniform one-month group-term premium is $1.05 per $1,000 of coverage. How much must Kobe include in income? A) $630 B) $1,200 C) $1,530 D) $1,950

Expert Solution

The solution of above problem falls under section 79 which states:

(a)General rule There shall be included in the gross income of an employee for the taxable year an amount equal to the cost of group-term life insurance on his life provided for part or all of such year under a policy (or policies) carried directly or indirectly by his employer (or employers); but only to the extent that such cost exceeds the sum of:

(1) the cost of $50,000 of such insurance, and

(2) the amount (if any) paid by the employee toward the purchase of such insurance.

According to the problem :

Kobe is provided a group term life insurance coverage of $ 100,000,by his employer which is in excess of the said limit $ 50,000 by $ 50,000.

Hence, Kobe is required to realize the portion of the permanent benefit i.e., $ 50,000 as W- 2 taxable income.

Therefore, he must include = $ 1.05/ 1000 * 50000 * 12 months = $630

Hence , Kobe must include $630 in his income. A) $630

ekkarill92 answered 2 years ago

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