Reference no: EM13991238
Leyh's Outdoor Adventures, Inc., would like to begin providing life insurance cover- age for its employees. Three employees are officers; each earns $100,000 per year. The other three employees each earn $40,000 per year. Ricardo, president of Leyh's, comes to you for advice on how to provide the coverage. He provides three alternatives, each of which will cost Leyh's $15,000 per year (an average of $2,500 per employee):
Option 1-Give each employee $2,500 to purchase coverage.
Option 2-Buy a group term life insurance policy under which each employee would be covered for an amount equal to twice her or his annual salary.
Option 3-Buy a whole life insurance policy under which each employee would receive $100,000 worth of coverage.
Ricardo asks you to evaluate these options and advise him on the tax conse- quences of each. Write a letter to Ricardo explaining the tax effects of each option. Include your recommendation of the option that provides the greatest overall tax benefits.
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