15. Under Section 79 of the Internal Revenue Code, if a 60-year-old employee is provided with...

15. Under Section 79 of the Internal Revenue Code, if a 60-year-old employee is provided with $180,000 of group term insurance, what would be the employee's annual taxable income on this insurance?

A. $85.80
B. $66.00
C. $1,425.60

D. $1,029.60

Expert Solution

As per Section 79 of Internal Revenue Code, any health benefit given to the employee upto the limit of $50,000 is exempt from tax. Any amount more than $50,000 is taxable in the hands of Employee.

Calculation of Employee's Annual Taxable Income on this insurance are:

1. Exceeding value of Coverage Amount = $ 180,000 - $ 50,000

= $ 130,000

2. Divide excess amount by 1000 and then multiply it by the monthly cost for 2019 which is 0.66 (per $1,000) for the age 60 through 64, according to the Price Table.

Taxable Income = $ (130,000/1,000) * 0.66

= $ 130 * 0.66

= $ 85.80

Therefore, employee's taxable income on this insurance is $ 85.80. Option A is correct.

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