for two years, lisa carson was able to pay the premiums on her whole life policy without borrowing. for the past two years, she has borrowed from the cash value of her whole life policy to pay the premiums. last year, she paid $95 of interest on the funds she borrowed. what are the tax implications in this situation? a) the interest expense is tax deductible because it does not exceed $100. b) the interest expense is not tax deductible because it does not exceed $100. c) the interest is deductible because lisa is in the business of continuing her insurance and the interest is deductible business interest expense. d) the interest expense is not tax deductible. explanation the interest expense is not tax deductible because interest on a loan incurred to purchase personal life insurance protection is considered personal interest, which is not deductible. personal loan interest is not tax deductible, regardless of whether the lender is a bank or a life insurance company. lo 2.1.1

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06-12-2022
Business

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for two years, lisa carson was able to pay the premiums on her whole life policy without borrowing. for the past two years, she has borrowed from the cash value of her whole life policy to pay the premiums. last year, she paid $95 of interest on the funds she borrowed. what are the tax implications in this situation? a) the interest expense is tax deductible because it does not exceed $100. b) the interest expense is not tax deductible because it does not exceed $100. c) the interest is deductible because lisa is in the business of continuing her insurance and the interest is deductible business interest expense. d) the interest expense is not tax deductible. explanation the interest expense is not tax deductible because interest on a loan incurred to purchase personal life insurance protection is considered personal interest, which is not deductible. personal loan interest is not tax deductible, regardless of whether the lender is a bank or a life insurance company. lo 2.1.1

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TanuSharma TanuSharma · Answer 1 · 2022-12-21T14:59:38+01:00

(d) The interest expense is not tax deductible because Personal loan interest, which is not deductible, is the interest paid on a loan taken out to buy personal life insurance. Whether a personal loan is being taken out from a bank or a life insurance business, the interest paid on the loan is not tax deductible

What is Personal Loan?

Personal loans are a form of closed-end credit with specified monthly payments (e.g., three, four, or five years). Personal loan interest rates are represented as a percentage of the amount borrowed (principal).

Banks must first borrow money for themselves, either from other banks or from the deposits of their customers, before they may offer loans. The expense of borrowing money from a bank and the inherent risk of lending money when there is no assurance that it will be returned is reflected in the interest rate on a personal loan.

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