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Don is the beneficiary of a $50,000 insurance policy on the life of his mother, Anna. To date, Anna has paid premiums of $16,000. What amount of gross income must be reported in each of the following cases?

a. Anna elects to cancel the policy and receives $20,000, the cash surrender value of the policy.

b. Anna dies and Don receives the face amount of the policy, $50,000.

c. Anna dies and Don elects to receive $15,000 per year for four years.

Liam Smith 08-Jun-2018
Answer: (Solved)
Liam Smith

Answer:

a. 4000 (20,000-16000)
b. 0
c. 10,000 (interest paid out over time 15,000 x 4 - 50,000

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