Question

JDD Corporation provides the following to its employee, Ahmed (age 50):

Salary	$	339,000
Health insurance		14,700
Dental insurance		2,100
Life insurance		3,900
Dependent care		4,200
Professional dues		1,310
Personal use of company jet		259,000

Assume the life insurance is a group-term life insurance policy that provides $294,000 of coverage for Ahmed. (Use EXHIBIT 12-8.)

Assuming Ahmed is subject to a marginal tax rate of 32 percent, what is his after-tax benefit of receiving each of these benefits? (Enter all amounts as positive values. Round your intermediate computations and final answers to the nearest whole dollar.)

EXHIBIT 12-8 Uniform Premiums for $1,000 of Group-Term Life Insurance Protection
Table Summary: Chart shows cost per $1,000 of life insurance protection for one month per 5-year age bracket.

5-Year Age Bracket Cost per $1,000 of Protection for One Month Under 25 $0.05 25 to 29     .06 30 to 34     .08 35 to 39     .09 40 to 44     .10 45 to 49     .15 50 to 54     .23 55 to 59     .43 60 to 64     .66 65 to 69   1.27 70 and above   2.06

Answer 1

After-tax benefit of Ahmed’s salary and benefits = $410325

Life insurance (taxable portion) = $(294000-50000) × (0.23 cents per $1,000) × 12 = $673

Income tax on benefits = $(339000+259000+673) × 32% = 598673*32% = $191575

After-tax benefit of taxable items = $598673 − $191575 = $407098

Life insurance (nontaxable portion) = $3900 − $673 = $3227

After-tax benefit of Ahmed’s salary and benefits = After-tax benefit of taxable items + Life insurance (nontaxable portion) = 407098+3227 = $410325