Question

Dow, 42, is a manager for Winter Company. In addition to his $82,000 salary, he receives the following benefits from Winter during the current year: . Winter pays all its employees' health and accident insurance. Premiums paid by Winter for Dow's health insurance are $1,200. Winter provides all employees with group term life insurance coverage equal to their annual salary. Premiums on Dow's $82,000 in coverage are $820. (See Table 4- 1 IRS Premium Table above) Winter has a flexible benefits plan in which employees may participate to pay any costs not reimbursed by their health insurance. Dow has $2,700 withheld from his salary under the plan. His actual unreimbursed medical costs are $3,430. Winter pays Dow the $2,700 paid into the plan during the year. All management-level Winter employees are entitled to employer-provided parking. The cost of Dow's parking in a downtown garage $4,100 for the year. Winter pays Dow's $100 monthly membership fee to a private health club located in the building in which Dow works. Dow uses the club during his lunch time and on weekends. If required, round your answer to the nearest cent. Dow has a gross income of $ for the current year.

Answer 1

The following amounts are to be included in Gross income of Dow

1. salary $82000

2.Premium paid $1200

3.premium on life insurance $820

Salary reimbursed from amount withheld for benefit plan under which employees can participate to pay any costs not reimbursed by their health insurance- $ 2700

$3,430 is ignored as amount paid by winter to dow is only $2,700. it is assumed that the withheld amount of $2,700 is not included in salary given in point 1.

4.Parking cost $4100

5.Membership fee of private club= $100 per month *12 Months = $1200

Total of the above Income = $92,020

Dow is 42 years aged he falls under 5th slab i.e Includible income fo $1.2 per $1,000 in excess of $50,000.Since gross income of Dow is $91,660 which is $42,020 more than $50,000 includible income can be calculated as

Includible income = ($42,020/1000)*1.2 = $50.424 rounded off to $50.After adding includible income Dow has gross income of $92,070 for the year 2019.