Chapter 7 Pt 6

Question 1

Attributable benefits recd by employees are

Answer 1

Not taxable as income

Question 2

Under key person disability income policy premium payments are

Made by employee and are tax free

Are made by the bsiness and are tax deductible

Are made by the business and are not tax deductible

Answer 2

Are made by the business and are not tax deductible

Question 3

No deductible to the business however benefits are recd tax free by the business

Death benefit
Executive benefit
Key person disability

Answer 3

Key person disability income policy

Question 4

Medical benefits; income benefits; death benefits; rehabilitation benefits provided

Answer 4

Workers compensation

Question 5

Legal process by which ins company seeks recovery of amount paid to insured from a third party who may have caused the loss; cannot collect twice

Workers comp
Subrogation
Premium payments

Answer 5

Subrogation

Question 6

Legal process that gives insurer after payment of loss right to seek recovery from third party responsible for loss known as

Principle of indemnity

Subrogation

Adverse selection

Answer 6

Subrogation

Question 7

Keeps insured from collection twice

Subrogation
Adverse selection
Right of rescission

Answer 7

Subrogation

Question 8

All concerning workers comp are correct EXCEPT

Workers comp laws are established by each state
All states have workers comp
Benefits include medical disability and rehab coverage
A worker recs benefits only if the work repeated injury was not their fault

Answer 8

Worker recs benefits only if work related injury was not their fault

Question 9

Under workers comp which are NOT included

Legal benefits
Income befnits
Death benefits

Answer 9

Legal benefits

Question 10

Transfer of insured’s right to seek damages from negligent party to insurer is found in which of following clauses

Salvage
Appraisal
Subrogation

Answer 10

Subrogation

Question 11

After payment of loss right to seek recovery from third party responsible for loss known as

Subrogation

Adverse selection
Right of rescission

Answer 11

Subrogation

Question 12

Construction work injury. Which plan?

Workers comp
Disability
Social security
Skilled nursing

Answer 12

Workers comp

Question 13

Under key person disability income policy premium payments are made by the

Business are are not tax deductible

Are made by the employee and are tax free

Are made but he business and are tax deductible

Answer 13

Are made by the business and are not tax deductible

Question 14

When are group disability income benefits recd by an employee NOT taxable as income

When amount of benefit is equal or less than amount from employer

When benefits recd are equal or less than employee’s percentage of contribution

When employee is 59.5

Answer 14

When benefits recd are equal or less than employee’s percentage of the contribution

Question 15

Benefits recd by employee that are attributable to his or her portion of contribution are not

Answer 15

Taxable

Question 16

Re group medical and dental ins which is INCORRECT

Premiums paid by employer are deductible as biz expense

Employee paid premiums may be deducted if certain conditions are met

Employee benefits are tax deductible the year in which they were recd

Benefits recd by employee are free from federal income tax

Answer 16

Emp benefits are tax deductibe the year in which they were recd

Question 17

Which of the following statements is correct concerning taxation of long term care ins

Excessive benefits may be taxable

Premiums are not dedu in any case

Premiums may be taxable as income

Answer 17

Excessive benefits may be taxable

Question 18

True re disability buy sell coverage

Premium payments are not dedu to biz

Benefits are considered taxable income to the biz

Is for corporate officers of closely held business

Provides funds for biz org to purchase the biz interest of a disabled partner

Answer 18

Benefits are considered taxable income to the biz

Question 19

How much can sole proprietor and partners who own medical expense plan deduct

25
50
75
100

Answer 19

100

Question 20

On partially contributory group disability income insurance only benefits related to premium paid by employer is taxable to employee. If insured pays 255 of monthly premium employee will be taxed on

Answer 20

75%

Question 21

Insured plan pays 4000 a month
Insured pays 25%
Employer pays 75%

How much of benefit is taxable

1000
2000
3000

Answer 21

3000

25% of 4000 =1000
4000-1000=3000

Question 22

Noncontributory group disability income plan has a 30 day elimination period nd offers benefits of 2000 a month. If Emp is unable to work for 7 months due to covered disability employee will rec

12000 taxable

12000
Non taxable

14000 non taxable

1400 taxable

Answer 22

12000 all taxable

7 months minus 1 month X 2000

Question 23

Under which employer provided plans are the benefits taxable to Emp in proportion to amount of premium paid by Emp

Major medical
Dental expense
Disability income

Answer 23

Disability income

Question 24

For group medical and dental expense ins what percentage of premium is deductible as biz expense

50
60
90
100

Answer 24

100

Question 25

All following are true of key person disability income policy except

Premiums are not deductible to biz

Income may be used to find replacement for key employee

Benefits are considered taxable income to the biz

Written to protect company in event a key employee becomes disabled and unable to work

Answer 25

Benefits are considered taxable income to the biz

Question 26

Re group medical and dental ins which of following is INCORRECT

Premiums paid by Emp are def as biz expense

Emp paid premiums may be fed if certain conditions are met

Emp benefits are tax ded the year in which tey were recd

Benefits recd by Emp are free from federal income tax

Answer 26

Emp benefits are tax deductible the year in which they were recd

Question 27

Under key person disability policy premium payments are made by

Employee and are tax free

Biz and are tax deductible

Made by biz and are not tax ded

Answer 27

Made by biz and are not tax ded

Question 28

Group disability income ins premiums paid by Emp are

Deductible by the Emp as an ordinary biz expense

Taxable to Emp

Tax ded by the Emp

Answer 28

Deductible by the Emp as ordinary biz expense

Question 29

Sole proprietor of biz makes total salary of 50000 a year. This year expenses reached 75000. What amount may sole proprietor deduct in regards to his med expenses

10000
25000
50000
75000

Answer 29

50000

Cannot legally exceed taxpayer’s earned income for year even if cost of medical expense plan exceeds this a mount of deduction

Question 30

Which is correct re taxation of disability income benefits

If portion is paid by Emp insured Emp must pay taxes on all benefits recd

If premiums are paid by insured Emp benefits are recd income tax free

If Emp paid entire premium all will be refunded

Answer 30

If all premiums are paid by the insured employee benefits are recd income tax free