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Disposition of the policy

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Bethany has a G2 whole life insurance policy with a face value of $250,000, cash surrender value (CSV) of $40,000, and adjusted cost basis (ACB) of $20,000. Last year, Bethany took out a policy loan which has not yet been repaid. The policy loan is currently valued at $10,000 including interest. Bethany owes $5,000 in unpaid premiums and her marginal tax rate (MTR) is 30%. If Bethany cancels her policy today, how much tax will she be required to pay related to the disposition of the policy?

Reference no: EM133120071

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