Question

Finch Corporation has a group term life insurance policy with coverage equal to half the employee’s annual salary. Keith, age 66, is president of the corporation and receives an annual salary of $100,000.

How much is Keith required to include in gross income from the insurance protection for the year? Assume cost per $1,000 of Protection for One-Month Period is $1.27.

Answer 1

Answer:- $762

exclusion applies to the first $50,000 of group term life insurance protection.

For each $1,000 of coverage in excess of $50,000, the employee must include the amounts.

Then keith required to include in gross income

= (100000-50000) / 1000 × 1.27 × 12

= (50000/1000) × 15.24

=$ 762

Note:-

If the plan discriminates in favor of certain key employees (e.g., officers), the key employees are not eligible for the exclusion.

In such a case, the key employees must include in gross income the greater of actual premiums paid by the employer or theamount calculated from the Uniform Premiums .

The other employees are still eligible for the $50,000 exclusion and continue to use the Uniform Premiums to compute the income from excess insurance protection.