Retirement and Other Insurance Concepts
How is a life settlement generally taxed to a seller who is not terminally ill?
Answer and explanation
Answer: A. The seller recovers basis tax free. Gain up to the cash surrender value is ordinary income and the remainder is generally capital gain. A terminally ill viator may exclude the proceeds under IRC Section 101(g).Source: Internal Revenue Service — IRS Pub. 525, sale of a life insurance policy and accelerated death benefits
More retirement and other insurance concepts questions
- A wife applies for and owns a policy on her husband's life, naming their child as beneficiary. What is this arrangement called?
- After a life settlement closes, who owns the policy and who is responsible for the premiums?
- Are individual life insurance premium payments tax-deductible for personal income tax purposes?
- Because variable annuity contracts involve investment risk in underlying securities subaccounts, what licenses must an agent hold to sell variable annuities in Texas?
- Four equal partners fund a cross-purchase buy-sell agreement with individual life policies. How many policies are required?
- How are contributions and qualified distributions structured for a Roth IRA?
590 Texas questions like this one.
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