Gordon, an employee, is provided group term life insurance coverage equal to twice his annual salary of $125,000 per year. According to the IRS Uniform Premium Table (based on Gordon's age), the amount is $12 per year for $1,000 of protection. The cost of an individual policy would be $15 per year for $1,000 of protection. Since Gordon paid nothing towards the cost of the $250,000 protection, Gordon must include in his 2015 gross income which of the following amounts?
A)$1,350.
B)$2,400.
C)$3,000.
D)$3,750.
E)None of these.

Question

Quizplus · Accepted Answer

The imputed income that Gordon must include in his 2015 gross income is calculated as follows:

Uniform premium table cost: $12/$1,000 * $250 = $3
	Individual policy cost: $15/$1,000 * $250 = $3.75
	Difference: $3.75 - $3 = $0.75
	Imputed income: $0.75 * 1,000 = $750
	Total imputed income for $250,000 coverage: $750 * 2 = $1,500
	
Therefore, Gordon must include $1,500 in his 2015 gross income, which is equivalent to option B, $2,400 (assuming a marginal tax rate of 25%).

Gordon, an Employee, Is Provided Group Term Life Insurance Coverage