4. Group-Term Life Insurance. (Obj. 2) Paine Distributing pays an annual premium

Question

4. Group-Term Life Insurance. (Obj. 2) Paine Distributing pays an annual premium for $90,000 for nondiscriminatory group-term life insurance coverage on its president, Fred J. Noble. Fred is 44 years of age. His wife, Melanie, is the policy’s beneficiary. For this group-term life insurance, Fred pays the company $0.20 per year for each $1,000 of coverage. His share of the insurance premium is deducted from his gross salary under Paine’s payroll deduction plan. What portion of the group-term life insurance cost is included in Fred’s gross income for the year?

Explanation / Answer

Answer=367.2$

Fred's age is 44 years ,therefore in accordance with IRIS table, cost for each month 1000$ coverage is 0.44$

Coverage taxable for each month=90000/1000*.44=39.6$

Coverage taxable for 12 months=39.6*12=475.2$

Fred already pays= 0.20*90000/1000=108$

Amount taxable to be shown as income=475.2-108$= 367.2$

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