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When employee benefits are includable in income

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Employee Benefits. Ursula is employed by USA Corporation. USA Corporation provides
medical and health, disability, and group term life insurance coverage for its employees.
Premiums attributable to Ursula were as follows:
Medical and health $3,600
Disability 300
Group term life (face amount is $40,000) 200
During the year, Ursula suffered a heart attack and subsequently died. Before her death,
Ursula collected $14,000 as a reimbursement for medical expenses and $5,000 of disability
income. Upon her death, Ursula's husband collected the $40,000 face value of the life
insurance policy.
a. What amount can USA Corporation deduct for premiums attributable to Ursula?
b. How much must Ursula include in income relative to the premiums paid?
c. How much must Ursula include in income relative to the insurance benefits?
d. How much must Ursula's widower include in income?

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Solution Summary

Reviews the allowability of employee benefits as related to corporate deductions and personal recognition of the benefits when premiums are paid and when benefits are paid out.

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a) USA Corporation can deduct all the premiums paid by USA Corporation on behalf of their employee Ursula. Because USA Corporations paid 100% of the premiums, they will deduct the entire payment. However, if Ursula was responsible for some portion of the payments, USA Corporation could not deduct the portion paid by Ursula. ...

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