Tavis works for a company that sponsors a flexible spending arrangement (FSA) as part of the cafeteria plan.Tavis's annual salary is $150,000 before any reduction for contributions to the FSA.Tavis elects to fund his FSA by reducing his salary by $2,500 to pay for medical and dental expenses not covered by insurance.Tavis pays $2,420 in qualified expenses through the FSA.The unused $80 is retained by the plan.Tavis received no distributions from this plan.Tavis's employer also paid $470 for premiums on a $240,000 face value group term life insurance policy for him.The group term life insurance rate is $0.15 per month per $1,000.Tavis is a key employee but it is not a discriminatory plan.How much gross income must Tavis report on his tax return?
A)$148,050
B)$147,932
C)$147,842
D)$147,580

Question

Quizplus · Accepted Answer

Tavis's gross income is reduced by the amount he contributes to the FSA, which is $2,500. He also receives $470 in employer-paid group term life insurance premiums, which is not taxable. Therefore, his gross income is $150,000 - $2,500 + $470 = $147,970. However, since the unused $80 in the FSA is retained by the plan, Tavis's gross income is further reduced by this amount, resulting in a gross income of $147,970 - $80 = $147,890.

Tavis Works for a Company That Sponsors a Flexible Spending