Each payment is taxable income of beneficiary

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Reference no: EM131923854

1. $100,000 death benefit is paid to the beneficiary, age 50, under pure life income (i.e. life annuity) option and the payment is $4000 per year. Based on IRS mortality table, the life expectance of 50 old is 35 years, then how much of each the payment is taxable income of the beneficiary?

a- $4000

b- $500

c- $ 2857

d- $1143

2. Which of the following living proceeds from life and health insurance is free from income tax? (1) Accelerated death benefits; (2) surrender value ; (3) Benefits from health insurance;(4) Benefits from LTC insurance that lower than the per diem limitation.

a- (3) AND (4) ONLY

b- (1) and (3) only

c- (1), (3), and (4)

d- (1), (2), (3), and (4)

3. Rebecca’s $100,000 ordinary life policy, issued 20 years ago, carries an annual premium of $ 1,300 and has a cash surrender value of $30,000. The sum of all dividends over the 20 year period is $10,000. If she surrendered the policy, how much the amount subject to ordinary income tax?

a- $23,000

b- $26,000

c- $16,000

d- $14,000

4. Under which of the following circumstance the death benefit is not included in the insured’s gross estate?

a- Mom purchased life insurance on dad, and named the kids as beneficiaries

b- Mom purchased life insurance on herself and named the kids as beneficiaries

c- Mom purchased life insurance on herself and didn’t name anyone as beneficiaries

d- If all of the above should be included in the insured’s gross estate, please choose D.

Reference no: EM131923854

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