Kristine is the controller of Evans Company. Evans provides all management level employees with medical insurance through a self-insured plan. During the current year, Kristine has $2,650 in medical expenses reimbursed by the plan. The income tax effect of the reimbursements Kristine receives is:
I.Kristine excludes the value of the reimbursement.
II.Kristine includes $2,650 in her gross income.

Question

Kristine is the controller of Evans Company. Evans provides all management level employees with medical insurance through a self-insured plan. During the current year, Kristine has $2,650 in medical expenses reimbursed by the plan. The income tax effect of the reimbursements Kristine receives is:
I.Kristine excludes the value of the reimbursement.
II.Kristine includes $2,650 in her gross income.
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Quizplus · Accepted Answer

Kristine must include the $2,650 in her gross income because it was a reimbursement from a self-insured plan provided by her employer. This is because the premiums for the insurance were paid for with pre-tax dollars, so any reimbursement received is considered taxable income. Statement I is incorrect because Kristine cannot exclude the value of this reimbursement.

Kristine Is the Controller of Evans Company