Final answer:
The deductibility of a $3,250 premium paid by Hope Corporation for a life insurance policy on their CEO depends on who the beneficiary is. If the CEO's daughter is the beneficiary and the premiums are recognized as income to Joel, it could be deductible as compensation. If Hope Corporation is the beneficiary, the premium is not deductible.
Step-by-step explanation:
Deductibility of Life Insurance Premiums
In the context of Hope Corporation paying a $3,250 premium for a life insurance policy on the life of the chief executive officer, Joel, the deductibility of the premium depends on the beneficiary of the policy. If Joel's daughter is the stated beneficiary, option (a), Hope could potentially deduct the premium as compensation. However, typically, in order for premiums to be deductible as compensation, the payment of the premiums would need to be recognized as taxable income to the employee. In contrast, if Hope Corporation is the beneficiary, as mentioned in option (b), the premium is not deductible. In the United States, premiums paid for life insurance policies where the payer is the beneficiary are not deductible for tax purposes because they are considered a personal expense.
To further clarify:
- a) Deductible as compensation if the law and regulations permit such treatment and the premiums are recognized as income to Joel.
- b) Not deductible if Hope is the beneficiary, as this is the common treatment under U.S. tax law.