Reference no: EM132655483

Problem - The rationale for excluding accelerated death benefits from the gross income of the terminally ill is that they often use the funds to pay medical expenses and other costs associated with dying and do not have the ability to pay tax on the gain from the accelerated receipt of the life insurance proceeds. Yet the wages of a terminally ill person who is employed (or profits of a self-employed person) are subject to Social Security taxes. The Social Security taxes are intended to pay for retirement benefits, but a terminally ill person is unlikely to collect any Social Security benefits. Bills have been introduced in Congress to exempt the terminally ill from the Social Security tax. Evaluate the equity of the current tax treatment versus that in the proposed legislation.