Sorely is an insurance agent and he meets with his client, Latoya, for an annual review. Latoya
Question:
Sorely is an insurance agent and he meets with his client, Latoya, for an annual review. Latoya owns a whole life insurance policy with a face value of $250,000, an adjusted cost basis (ACB) of $44,000, and a cash surrender value (CSV) of $68,000. The annual premium on her policy is $8,000. Latoya tells Sorely that she would like to make a charitable donation to her favourite charity. Which of the following statements about charitable donations is CORRECT?
a) If Latoya assigns the policy to a charity, she will receive a tax credit based on a $44,000 charitable donation in the current year.
b) If Latoya assigns the policy to a charity, she will receive a tax credit based on a $68,000 charitable donation in the current year.
c) If Latoya names a charity as beneficiary, she will receive a tax credit based on a $250,000 charitable donation in the current year.
d) If Latoya names a charity as beneficiary, she will receive a tax credit based on a $318,000 charitable donation in the current year.
Introduction to Risk Management and Insurance
ISBN: 978-0131394124
10th edition
Authors: Mark S. Dorfman, David Cather