Federal Taxation of Health Insurance Exam Bank Solution Manual Already Passed
Ginger operates an accounting business as a sole proprietor. She pays $1,600 each month in premiums
for a medical insurance policy covering herself and her family. Which of the following statements
correctly describes the tax treatment of this policy? - Answers Ginger can deduct 100 percent of the
premiums paid for her health insurance policy, and benefit payments are tax free.
For tax purposes, long-term care insurance policies are either: - Answers tax qualified or non-tax
qualified
Self-employed persons can deduct the premiums paid for insurance that covers them, their spouses, and
their dependents for all the following types of insurance EXCEPT: - Answers disability income insurance
Which of the following statements regarding the tax treatment of medical expense insurance premiums
and benefits is correct? - Answers premiums may be deductible as an unreimbursed medical expense
and benefits are not taxable
Dave has a small business. What kind of insurance can his small business use to provide funds necessary
to continue operations if he becomes disabled? - Answers business overhead expense insurance
Which of the following statements regarding key person disability income insurance is correct? -
Answers Benefit payments are income tax-free.
Which of the following statements correctly describes the tax treatment of disability buy-out insurance?
- Answers Premiums are not tax-deductible and benefit payments are tax-free.
Benefits paid under Ken's qualified long-term care policy up to a daily limit are not taxed. What must
happen for Ken to receive these amounts tax free? - Answers He must be diagnosed as chronically ill.
Sandra, a shop owner, owns a business overhead expense (BOE) insurance policy. Which of the following
statements correctly describes the tax treatment of this policy? - Answers BOE benefits are taxable as
income to Sandra, and premiums are tax deductible.
Which of the following statements correctly describes the tax treatment business overhead expense
(BOE) insurance? - Answers Premiums are tax-deductible and benefit payments are taxable.
For taxation purposes, the term "self-employed person" includes all of the following EXCEPT: - Answers
C corporation stockholders
An insured is chronically ill and receives nursing care at home. The insured's long-term care insurance
policy pays a daily benefit of $250, which is equal to the daily expenses incurred. Which statement is
correct? - Answers None of the benefit is taxable income.
Will's employer pays the premiums for his group disability income insurance policy. Which statement is
correct about the tax treatment of the premiums and benefits? - Answers Will cannot deduct the
premiums that the company pays on his behalf.
, The medical expense deduction applies to qualified medical expenses as the IRS defines them. Which of
the following is NOT a qualified medical expense? - Answers cosmetic surgery
All the following statements about the taxation of accidental death and dismemberment (AD&D) policy
benefits are correct EXCEPT: - Answers Any interest earnings paid are not taxed.
Melina paid $7,000 for medical care this year. If her adjusted gross income is $50,000 this year, how
much of these expenses can she deduct from her income taxes, if any? - Answers $2,000
Which statement about taxation of a health savings account is correct? - Answers The earnings in the
account are not taxable income.
All the following statements regarding the tax treatment of disability income and medical expense
insurance are correct, EXCEPT: - Answers Major medical insurance policy premiums may be deductible
but premiums for HMO and PPO plans are not deductible under any circumstances.
Which of the following best describes the IRS rule that applies to deductible medical expenses for
persons under age 65? - Answers A person can deduct unreimbursed medical expenses exceeding 10
percent of his or her adjusted gross income (AGI).
An employer pays $500 in premiums annually for each employee enrolled in its group medical plan. How
much of the contribution is taxable income to the employee? - Answers $0
With respect to the tax treatment of a disability buyout insurance policy, which of the following
statements is correct? - Answers Policy premiums are not tax deductible to the business, and benefit
payments are tax-free.
Sandra has a Section 125 cafeteria plan. To pay for her benefits, the employer will: - Answers withhold
part of her pre-tax salary
Funds in a health savings account that are withdrawn but not used for qualified medical expenses are: -
Answers taxed as income
All the following are types of disability insurance designed exclusively for business owners EXCEPT: -
Answers individual disability income insurance
Sophia owns a small publishing company and is covered by a business overhead expense policy. After
suffering a disabling injury, the policy pays a $10,000 monthly benefit. How must the benefits be treated
for tax purposes? - Answers The benefits are fully taxable in the year received.
Which of the following statements correctly describes the tax treatment of individual medical and long-
term care insurance premiums paid by self-employed individuals? - Answers They can be taken as an
'above the line' deduction to directly reduce taxable income.
Ginger operates an accounting business as a sole proprietor. She pays $1,600 each month in premiums
for a medical insurance policy covering herself and her family. Which of the following statements
correctly describes the tax treatment of this policy? - Answers Ginger can deduct 100 percent of the
premiums paid for her health insurance policy, and benefit payments are tax free.
For tax purposes, long-term care insurance policies are either: - Answers tax qualified or non-tax
qualified
Self-employed persons can deduct the premiums paid for insurance that covers them, their spouses, and
their dependents for all the following types of insurance EXCEPT: - Answers disability income insurance
Which of the following statements regarding the tax treatment of medical expense insurance premiums
and benefits is correct? - Answers premiums may be deductible as an unreimbursed medical expense
and benefits are not taxable
Dave has a small business. What kind of insurance can his small business use to provide funds necessary
to continue operations if he becomes disabled? - Answers business overhead expense insurance
Which of the following statements regarding key person disability income insurance is correct? -
Answers Benefit payments are income tax-free.
Which of the following statements correctly describes the tax treatment of disability buy-out insurance?
- Answers Premiums are not tax-deductible and benefit payments are tax-free.
Benefits paid under Ken's qualified long-term care policy up to a daily limit are not taxed. What must
happen for Ken to receive these amounts tax free? - Answers He must be diagnosed as chronically ill.
Sandra, a shop owner, owns a business overhead expense (BOE) insurance policy. Which of the following
statements correctly describes the tax treatment of this policy? - Answers BOE benefits are taxable as
income to Sandra, and premiums are tax deductible.
Which of the following statements correctly describes the tax treatment business overhead expense
(BOE) insurance? - Answers Premiums are tax-deductible and benefit payments are taxable.
For taxation purposes, the term "self-employed person" includes all of the following EXCEPT: - Answers
C corporation stockholders
An insured is chronically ill and receives nursing care at home. The insured's long-term care insurance
policy pays a daily benefit of $250, which is equal to the daily expenses incurred. Which statement is
correct? - Answers None of the benefit is taxable income.
Will's employer pays the premiums for his group disability income insurance policy. Which statement is
correct about the tax treatment of the premiums and benefits? - Answers Will cannot deduct the
premiums that the company pays on his behalf.
, The medical expense deduction applies to qualified medical expenses as the IRS defines them. Which of
the following is NOT a qualified medical expense? - Answers cosmetic surgery
All the following statements about the taxation of accidental death and dismemberment (AD&D) policy
benefits are correct EXCEPT: - Answers Any interest earnings paid are not taxed.
Melina paid $7,000 for medical care this year. If her adjusted gross income is $50,000 this year, how
much of these expenses can she deduct from her income taxes, if any? - Answers $2,000
Which statement about taxation of a health savings account is correct? - Answers The earnings in the
account are not taxable income.
All the following statements regarding the tax treatment of disability income and medical expense
insurance are correct, EXCEPT: - Answers Major medical insurance policy premiums may be deductible
but premiums for HMO and PPO plans are not deductible under any circumstances.
Which of the following best describes the IRS rule that applies to deductible medical expenses for
persons under age 65? - Answers A person can deduct unreimbursed medical expenses exceeding 10
percent of his or her adjusted gross income (AGI).
An employer pays $500 in premiums annually for each employee enrolled in its group medical plan. How
much of the contribution is taxable income to the employee? - Answers $0
With respect to the tax treatment of a disability buyout insurance policy, which of the following
statements is correct? - Answers Policy premiums are not tax deductible to the business, and benefit
payments are tax-free.
Sandra has a Section 125 cafeteria plan. To pay for her benefits, the employer will: - Answers withhold
part of her pre-tax salary
Funds in a health savings account that are withdrawn but not used for qualified medical expenses are: -
Answers taxed as income
All the following are types of disability insurance designed exclusively for business owners EXCEPT: -
Answers individual disability income insurance
Sophia owns a small publishing company and is covered by a business overhead expense policy. After
suffering a disabling injury, the policy pays a $10,000 monthly benefit. How must the benefits be treated
for tax purposes? - Answers The benefits are fully taxable in the year received.
Which of the following statements correctly describes the tax treatment of individual medical and long-
term care insurance premiums paid by self-employed individuals? - Answers They can be taken as an
'above the line' deduction to directly reduce taxable income.
