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24 February, 01:57

Nick purchased a $100,000 participating whole-life insurance policy on his life. To date, he has paid $50,000 in total premiumsand received $10,000 in dividends. The policy currently has a net cash value of $15,000 and is subject to a $30,000 outstanding loan. If Nick decides to surrender the policy, he would realize a gain of:

A. $0

B. $5,000

C. $10,000

D. 15,000

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  1. 24 February, 05:46
    0
    correct option is A. $0

    Explanation:

    given data

    purchased = $100,000

    paid = $50,000

    dividend received = $10,000

    net cash value = $15,000

    outstanding loan = $30,000

    solution

    as there will be no gain on surrender of a whole life insurance policy.

    as we get taxable income gain that is

    taxable income gain = cash value + outstanding loan + dividends

    - premiums ... 1

    taxable income gain = 15,000 + 30,000 + 10,000 - 50000

    taxable income gain = - 5000

    so gain is zero

    so correct option is A. $0
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