Question

Julie was suffering from a viral infection that caused her to miss work for 90 days. During the first 30 days of her absence, she received her regular salary of $8,000 from her employer. For the next 60 days, she received $12,000 under an accident and health insurance policy purchased by her employer. The premiums on the health insurance policy were excluded from her gross income. During the last 30 days, Julie received $6,000 on an income replacement policy she had purchased. Of the $26,000 she received, Julie must include in gross income:

A. $0.
B. $6,000.
C. $8,000.
D. $14,000.
E. $20,000.

Answer 1

Julie must include in gross income the $14,000 received from the accident and health insurance policy paid for by her employer, not the $8,000 of regular salary or the $6,000 from her own income replacement policy. The correct option is D.$14,000.

Step-by-step explanation:

Among the $26,000 Julie received while she was suffering from a viral infection, she must include in gross income any amounts received through accident, health insurance, and income replacement policies for which she did not pay the premiums. The regular salary she received directly from her employer for the first 30 days, which totaled $8,000, is not included in this consideration, as it is standard taxable income, similar to what she would have received even if she were working. Therefore, of the amounts received, Julie must include in her gross income the $12,000 from the accident and health insurance policy that was paid by her employer. The $6,000 received from the income replacement policy she had purchased does not need to be included because premiums on this policy were likely paid with after-tax dollars. Consequently, the correct answer is D. $14,000.