Rex is a programmer with Monon Electronics Corporation. His annual salary is $50,000. As part of his compensation package, he receives a term-life insurance policy equal to his annual salary. All members of the programming staff receive this benefit. Members of the sales staff have a cafeteria plan from which to select various benefits including life and health insurance coverage.
I.Rex has an excludable amount of income because of the nature of his employment benefit.
II.Rex must include $50,000 in his gross income because that is the value of the insurance benefit.
III.Rex must include the cost of the insurance policy in his gross income.
IV.If the benefit is only available to "key" employees and Rex is a "key" employee, he may exclude the cost of the premiums paid from his gross income.

Question

Rex is a programmer with Monon Electronics Corporation. His annual salary is $50,000. As part of his compensation package, he receives a term-life insurance policy equal to his annual salary. All members of the programming staff receive this benefit. Members of the sales staff have a cafeteria plan from which to select various benefits including life and health insurance coverage.
I.Rex has an excludable amount of income because of the nature of his employment benefit.
II.Rex must include $50,000 in his gross income because that is the value of the insurance benefit.
III.Rex must include the cost of the insurance policy in his gross income.
IV.If the benefit is only available to "key" employees and Rex is a "key" employee, he may exclude the cost of the premiums paid from his gross income.
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Quizplus · Accepted Answer

Statement I is correct because employer-provided group-term life insurance up to $50,000 in coverage is generally excludable from income, according to the IRS. Statements II and III are incorrect because the cost of the first $50,000 of coverage provided to an employee is excludable from income and does not need to be included in gross income. Statement IV is incorrect in this context because the exclusion applies regardless of whether an employee is considered "key" for the first $50,000 of coverage.

Rex Is a Programmer with Monon Electronics Corporation