Messrs. Allen and Roberts Case Study

Albert Allen and Robert Roberts currently receive benefits under an accident and health plan from ABC, Inc., a Florida corporation.  ABC is in the business of supplying widgets throughout South and Central America.  In the past decade, ABC has been quite profitable.

Mr. Allen is the Senior Vice-President of ABC’s Midwest operations, but practices law full-time in Michigan.  ABC does not have office in the Midwest and most likely never will open an office outside South Florida.  Nevertheless, the cost of providing this benefit to Mr. Allen is of little financial consequence to ABC.

Mr. Roberts was recently terminated as an employee with ABC.  In negotiating his termination, ABC agreed to continue to his accident and health insurance for a period of five years.

What are the income tax consequences to Messrs. Allen and Roberts of the benefits they received from ABC, Inc.?

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