Chapter 5, Problem 67P

Terry was ill for three months and missed work during this period. During his illness, Terry received $4,500 in sick pay from a disability insurance policy. What amounts are included in Terry’s gross income under the following independent circumstances?

1. a) Terry has disability insurance provided by his employer as a nontaxable fringe benefit. Terry’s employer paid $2,800 in disability premiums for Terry this year.
2. b) Terry paid $2,800 in premiums for his disability insurance this year.
3. c) Terry’s employer paid the $2,800 in premiums for Terry, but Terry elected to have his employer include the $2,800 as compensation on Terry’s W-2.
4. d) Terry has disability insurance whose cost is shared with his employer. Terry’s employer paid $1,800 in disability premiums for Terry this year as a nontaxable fringe benefit, and Terry paid the remaining $1,000 of premiums from his after-tax salary.