TrendSetter Incorporated paid $50,000 in premiums for life insurance coverage for its key employees for which TrendSetter Incorporated is the beneficiary. What is the nature of the book-tax difference created by this expense?

Question

Quizplus · Accepted Answer

The premiums paid for life insurance where the company is the beneficiary are not deductible for tax purposes, creating a permanent difference between book income and taxable income. This difference is unfavorable because it increases taxable income without a corresponding deduction.

TrendSetter Incorporated Paid $50,000 in Premiums for Life Insurance Coverage