An employer pays the entire premium for $90,000 of group term life insurance on a 45-year-old employee. Under IRC Section 79, how is the employee's taxable imputed income on this coverage determined?

Why A is correct

IRC Section 79 excludes the first $50,000 of employer-paid group term life death benefit from the employee's income. For coverage above that threshold, the taxable imputed income is computed by applying the IRS uniform premium table (Table I) rate for the employee's age to the excess amount - here, $90,000 minus $50,000, or $40,000 of coverage. The Table I rate, not the employer's actual premium cost, determines the amount included in the employee's gross income, and the employer's premium payments remain deductible as a business expense.

Why the other options are wrong

• B) Both the measure and the base are wrong: imputed income is based on the age-rated Table I rate rather than the employer's actual cost, and the first $50,000 of coverage is excluded.
• C) The base is right, but the measure is wrong: the taxable amount comes from the uniform premium table for the employee's age bracket, not from the premium the employer actually paid.
• D) Employer payment of the premium does not shelter the benefit; the value of employer-provided coverage above $50,000 is income imputed to the employee.

Memory hook

First $50K of group term is free money; the excess shows up on the W-2.