Bison Financial Group has a health-care plan for all employees.Dan,an employee,is single and owns 10% of Bison Financial.In 2016,the company paid $2,000 for Dan's health plan.Which of the following are correct statements?
I.If Bison Financial Group is an S corporation,Dan must report the $2,000 as income and can deduct the $2,000 as an itemized medical expense deduction.
II.If Bison Financial Group is a partnership,Dan must report the $2,000 as income and can deduct $2,000 as a deduction for AGI.

Question

Bison Financial Group has a health-care plan for all employees.Dan,an employee,is single and owns 10% of Bison Financial.In 2016,the company paid $2,000 for Dan's health plan.Which of the following are correct statements?
I.If Bison Financial Group is an S corporation,Dan must report the $2,000 as income and can deduct the $2,000 as an itemized medical expense deduction.
II.If Bison Financial Group is a partnership,Dan must report the $2,000 as income and can deduct $2,000 as a deduction for AGI.​

Quizplus · Accepted Answer

If Bison Financial Group is a partnership, the health-care plan expense will pass through to the individual partners on Schedule K-1, and Dan must report it as income. He can then deduct it as a deduction for AGI. However, if Bison Financial Group is an S corporation, the health-care plan expense is not included in the employee's income, and they cannot deduct it as a medical expense deduction.

Bison Financial Group Has a Health-Care Plan for All Employees