JDD Corporation provides the following benefits to its employee, Ahmed (age 26):
ID: 2402286 • Letter: J
Question
JDD Corporation provides the following benefits to its employee, Ahmed (age 26):
Assume the life insurance is a group-term life insurance policy that provides $226,000 of coverage for Ahmed. (Use EXHIBIT 12-10.)
a. Assuming Ahmed is subject to a marginal tax rate of 30 percent, what is his after-tax benefit of receiving each of these benefits (ignoring FICA taxes)? (Enter all amounts as positive values. Round your intermediate computations and final answers to the nearest whole dollar.)
Explanation / Answer
SOLUTION
The after-tax benefit of Ahmed’s salary and benefits is $448,199, calculated as follows:
S.No. Particulars Amount ($) Explanation Taxable Benefits 1 Salary 323,000 2 Personal use of company jet 278,000 3 Life Insurance (taxable portion) 270 ($150,000 * (0.15 cents per $1,000) *12 4 Taxable Total 601,270 (1+2+3) 5 Marginal tax rate 30% 6 Income tax on benefits 180,380 (4*5) 7 After-tax benefit of taxable items 420,889 (4-6) Nontaxable Benefits 8 Health Insurance 12,500 9 Dental Insurance 3,900 10 Life Insurance (nontaxable portion) 5,130 (5,400-270) 11 Dependent Care 4,400 12 Professional Dues 1,380 13 Nontaxable Total 27,310 (8+9+10+11+12) After-tax benefit of salary and benefits 448,199 (7+13)Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.