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Brad is going to terminate his $650,000 whole life insurance policy. The $5,600 annual premium, which he hasn’t paid, was due 14 days ago and he does not plan on making that payment. The policy has a CSV of $102,000 and an ACB of $48,000. In addition, he has a $40,000 policy loan that is outstanding with interest owing of $5,300, and the outstanding premium for the last 14 days is $215. When Brad terminates this policy what will the taxable gain be?

Select one:

a. $62,000

b. $8,485

c. $2,885

d. $56,485

Respuesta :

ytas

Answer:

b.8,485

Explanation:

To calculate the taxable gain when terminating the policy, we need to consider the cash surrender value (CSV), the adjusted cost basis (ACB), outstanding policy loans, and any outstanding premiums.

Taxable Gain = CSV - (ACB + Outstanding Loans + Outstanding Premiums)

Taxable Gain = $102,000 - ($48,000 + $40,000 + $5,300 + $215)

Taxable Gain = $102,000 - $93,515

Taxable Gain = $8,485

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