10th Edition

ISBN: 9781260799705

Author: SPILKER

Publisher: MCG

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Chapter 5, Problem 38DQ

Tom was just hired by Acme Corporation and has decided to purchase disability insurance. This insurance promises to pay him weekly benefits to replace his salary should he be unable to work because of disability. Disability insurance is also available through Acme as part of its compensation plan. Acme pays these premiums as a nontaxable fringe benefit, but the plan promises to pay about 10 percent less in benefits. If Tom elects to have Acme pay the premiums, then his compensation will be reduced by an equivalent amount. Should tax considerations play a role in Tom’s choice to buy disability insurance through Acme or on his own? Explain.

Definition Definition Benefits in addition to compensation that companies give to their employees. Fringe benefits can boost morale and productivity and keep employees motivated. Companies often use fringe benefits as a competitive advantage to recruit and retain employees. Examples of fringe benefits include pensions, vacation time, tuition reimbursement, free or subsidized meals, and gym memberships.

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Chapter 5, Problem 37DQ

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Chapter 5 Solutions

TAXATION INDIVIDUALS & BUSINESS ENTITIE

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Solution Summary: The author explains whether the tax considerations should play a role in Person T's choice to buy disability insurance through Corporation A or on his own.

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