Question

 

1- Interest on insurance dividends left on deposit with an insurance company and withdrawable upon demand is taxable to the policyholder only when actually withdrawn.

2. Payments up to a total of $5,000 to the beneficiaries of a deceased employee by an employer because of that employee's death are excludable from income by the beneficiaries if the employee had no right to receive these payments during life.    

3- Gina Gander, a cash basis taxpayer, purchased a Series EE savings bond. She must include the increase in redemption value as interest income each year.

4- Meals furnished to employees as part of their compensation are deductible by the employer at their fair market value.         

5. Thomas Thinne, a cash basis taxpayer, may either defer reporting the interest on Series E bonds until he cashes the bonds or he may choose to report the increase in redemption value as interest each year.               

6- Max Miller, the owner of a boutique, has a valuable employee for whom he pays a $200 annual premium for a $50,000 life insurance policy. The employee's husband is the beneficiary. This benefit when added to her regular salary does not make the total compensation unreasonable. Max may deduct the premium as a business expense.

7- Dina Durham purchased U.S. savings bonds which she had issued in her name and that of her child as co-owners. Dina let her child redeem the bonds and keep all the proceeds. The interest is taxable to her child.

8- Unemployment compensation is always included in gross income.

9- Social security benefits are always included in gross income.   

10. An example of a qualified benefit is an employer-subsidized cafeteria.
11. An annuity is a contract that pays a fixed income at set regular intervals for a specific period of time.   

12- Amounts received under worker's compensation as compensation for personal injuries are excludable from gross income.

13. James Jenkins, a key employee, has group-term life insurance coverage of $100,000 paid for by his employer. The plan discriminates in favor of key employees. James must include the actual cost of the $100,000 policy in his income.

14- Insurance policy dividends used to purchase additional life insurance are not taxable to the policy owner.  

15. Dividend payments made by an insurance company that are based on an policy and that exceed the total amount of premiums paid by the insured are taxable to the insured.

Answer 1

1. False because it is exempt income except under special circumstance
2. True as this is as per regulations
3. False as it is not necessary that there will always be increase in redemption value.
4. False as it is deductible only at cost to the company.
5. True as this is as per the IRS provisions.
6. True as the annual premium paid on employees life insurance policy can be deducted as business expense.
7. True as when the children are made co-owners in any savings bonds, redemption will lead to taxation in the hand s of children.
8. True as amongst other things unemployment compensation forms part of gross income.
9. False as gross income excludes social security benefits.
10. True as anything employer provides form part of qualified benefit like subsidized cafeteria
11. True as annuity annuity is series of payments over a period of time.
12. True as gross income does not include any amount received under worker’s compensation.
13. True as in case of key employees life insurance, the cost of insurance shall be included in the income of employees.
14. True as these dividends from insurance are exempt except under special circumstance
15. True because when the dividends payment exceed the total amount of premiums paid by insured, the amount is taxable