Bart is a participant in his employers health insurance plan. The plan pays all costs of medical care of employees, less a $20 co-payment that must be paid by the employee at the time of service. Bart also subscribes to a voluntary health insurance plan sponsored by his employer that pays him a lump sum of $50,000 in the event he contracts cancer. The employee and the employer share the premium costs, and employee premium contributions are treated as pre-tax contributions to the insurance policy (plan). Earlier this year, Bart was diagnosed with cancer, and he received benefits under both policies (plans). His total out-of-pocket medical and prescription drug expenses for the cancer treatments was $800 (the rest was covered by his regular medical insurance policy). If Bart had no other medical costs this year, which of the following statements concerning the taxation of Barts insurance benefits is correct?

		There is no tax on the insurance benefits received.
		Bart must pay tax on the imputed value of the benefits received because he paid premiums with pre-tax dollars.
		Bart will have to pay income tax on $50,000.
		Bart will have to pay income tax on $49,200.