Question

(T/F) If the employer provides all employees with group term life insurance equal to twice the employee's annual salary, an employee with a salary of $50,000 has no gross income from the life insurance protection provided by the employer.

Answer 1

Term life insurance provided by an employer covering up to $50,000 is not considered taxable gross income. However, for an employee with a $50,000 salary receiving coverage of $100,000, only the first $50,000 is tax-free.

Step-by-step explanation:

The statement suggests that an employee with a salary of $50,000 who receives group term life insurance equal to twice their annual salary has no gross income from the life insurance provided by the employer.

This is partially true. According to IRS guidelines, the cost of up to $50,000 of group-term life insurance coverage provided by an employer can be excluded from taxable income.

Therefore, if the employer provides group term life insurance equal to twice the employee's annual salary, which is $100,000, the first $50,000 of coverage is not taxable, but the cost of the coverage over $50,000 should be included in the employee's gross income unless specifically excluded by other laws or regulations.

This value is determined by the IRS Premium Table, and any amount above that $50,000 threshold would be considered imputed income and thus part of the gross income.