Question

L Corporation, an S electing corporation, pays single coverage health insurance premiums of $4,000 per year and family coverage premiums of $7,000 per year (the $7,000 includes single and family coverage). SH owns 10% of L stock, and L pays SH's family coverage under the health insurance plan. What amount of insurance premium is included in SH's gross income?

Answer 1

$7,000

Step-by-step explanation:

Since SH owns more than 2% of L Corporation, then the entire insurance premium should be included in SH's gross income. Only if SH owned less than 2% of L Corporation, would the insurance premium be excluded from his/her income.

S Corporations are corporations that pass their income, deductions, losses, and credits to their shareholders directly to avoid double taxation.