Question

JDD Corporation provides the following benefits to its employee, Ahmed (age 47): Salary $ 311,000 Health insurance 13,600 Dental insurance 2,400 Life insurance 3,600 Dependent care 4,500 Professional dues 960 Personal use of company jet 233,000 The life insurance is a group-term life insurance policy that provides $225,000 of coverage for Ahmed. Assuming Ahmed is subject to a marginal tax rate of 32 percent, what is his after-tax benefit of receiving each of these benefits

Answer 1

Answer:

total after tax benefits = $373,365.44

Explanation:

Salary $311,000  x (1 - 32%) = $211,480

Health insurance $13,600  

Dental insurance $2,400  

Life insurance $3,600  - $483 - [$483 x (1 - 32%)] = $2,788.56

Life insurance policy coverage for $225,000

Dependent care $4,500

Professional dues $960

Personal use of company jet $233,000 x (1 - 32%) = $158,440

Ahmed's tax rate = 32%

Life insurance taxable benefits = ($225,000 - $50,000) × (0.23 cents per mil) × 12 months = $483

income tax = (salary + personal use of jet + life insurance) x 32% = ($311,000 + $233,000 + $483) x 32% = $544,483 x 32% = $174,234.56

total after tax benefits = (salary + personal use of jet + life insurance) - income tax + (life insurance - life insurance taxable benefits) = $544,483 - $174,234.56 + ($3,600 - $483) = $373,365.44