Group term life insurance

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Group Term Life Insurance (LO. 4)

The LMN Partnership has a group term life insurance plan. Each partner has $150,000 of protection, and each employee has protection equal to twice his or her annual salary. Employee Alice (age 32) has $90,000 of insurance under the plan, and partner Kay (age 47) has $150,000 of coverage. Because the plan is a "group plan," it is impossible to determine the cost of coverage for an individual employee or partner.

a. Assuming that the plan is nondiscriminatory, how much must Alice and Kay each include in gross income as a result of the partnership paying the insurance premiums?


b. Assume that the partnership is incorporated. Kay becomes a shareholder and an employee who receives a $75,000 annual salary. The corporation provides Kay with $150,000 of group term life insurance coverage under a nondiscriminatory plan. What amount is included in Kay's gross income as a result of the corporation paying the insurance premiums?

Reference no: EM13663906

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