Mr. Smith exchanges one life insurance policy on his life for another policy on his life. The
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Question:
Mr. Smith exchanges one life insurance policy on his life for another policy on his life. The exchange will qualify as an exchange under Internal Revenue Code section 1035. He has paid $80,000 in premiums over the years and the old policy is now worth $85,000 (without regard to any loans). Also, the old policy has an outstanding loan of $10,000. The new policy will be worth $75,000 and the loan from the old policy will be forgiven. How much will Mr. Smith be taxed on this exchange, assuming he holds the new policy until at least after the end of this year?
A - $0
B - $5,000
C - $10,000
D - $100,000
Related Book For
Ethics in Accounting A Decision Making Approach
ISBN: 978-1118928332
1st edition
Authors: Gordon Klein
Posted Date: