Question

Which of the following statements regarding federal taxation of group accidental death and dismemberment policies is correct?

A) Contributions to the policy are tax-deductible.
B) Premiums paid by the employer are taxable to the employee.
C) Death benefits received are tax-free to the beneficiary.
D) Cash value accuμlation within the policy is taxed annually.

Answer 1

The correct statement is that death benefits received from group accidental death and dismemberment policies are tax-free to the beneficiary.

Step-by-step explanation:

The correct statement regarding federal taxation of group accidental death and dismemberment policies is option C) Death benefits received are tax-free to the beneficiary.

Under federal tax law, the death benefits received from a group accidental death and dismemberment policy are typically tax-free to the beneficiary. This means that the beneficiary does not have to report the death benefits as taxable income on their federal tax return.

It is important to note that contributions to the policy are not tax-deductible (option A) and premiums paid by the employer are not taxable to the employee (option B). Additionally, cash value accumulation within the policy is not taxed annually (option D).