oblem $2-15($Algorithmic$)$

e Insurance $($LO $2\mathrm{.}8)$

aron transfers to Russ a life insurance policy with a cash surrender value of $$32,000$ and a face value of $$96,000$ in exchange for real estate. Russ continues to y the premiums on the policy until Sharon dies seven years later. At that time, Russ has paid $$14,400$ in premiums, and he collects the $$96,000$ face value.

ow much of the proceeds is taxable to Russ?

hy$?$

ince the policy was transferred for valuable consideration, the proceeds

re taxable to the extent that they exceed the sum of the cash value at the time of transter plus the premiums pald. $$

Feetback

Life insurance proceeds normally are excluded from gross income when paid to the beneficiary by reason of the death of the insured. Howteve, an

Crieck My Work insurance policy transferred for valuable consideration may be taxable to the recipient.