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pshichka [43]
3 years ago
7

Ms. Cole purchased a $546,000 insurance policy on her own life and named her son as sole beneficiary. She has paid $33,852 total

premiums to keep this policy in force. This year, she liquidates the policy for its $42,042 cash surrender value. Does she recognize income on the liquidation? Now assume that Ms. Cole is terminally ill. The insurance policy provides that a person with a life expectancy of less than one year can liquidate the policy and receive 80 percent of the death benefit. She does so and receives a $436,800 accelerated death benefit. Does she recognize income on the liquidation?
Business
2 answers:
sergejj [24]3 years ago
8 0

Answer:

Does she recognize income on the liquidation?

Yes, she must recognize the difference between the policy's surrender value and the total premiums paid = $42,042 - $33,852 = $8,190 must be recognized as income.

Does she recognize income on the liquidation?

No, she doesn't have to pay any taxes. Payments to terminally ill policy holders are treated in the same way as death benefits.

galben [10]3 years ago
4 0

Answer:

Explanation:

For insurance policies that are liquidated, the difference between the cash surrender value and the total premium paid till date, should be recognized as ordinary income. However, when an insurance policy is liquidated for accelerated death benefit due to terminal illness, the proceeds are excluded from taxable income.

Ms. Cole has to recognize an income on the Liquidation as per this calculation here:

Income = Cash surrender value - Total premium paid

=42,042 - 33,852

= $8190

Therefore Ms. Cole should recognize the $8190 of income.

Ms. Cole liquidates the policy and receives 80% as an accelerated death benefit. So, Ms. Cole should recognize $0 of income

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blagie [28]

Answer:

Explanation:

The preparation of the statement of stockholder equity and balance sheet is presented below:

a. Statement of stockholder equity

<u>Particulars            Common stock         Retained earnings      Total stock equity</u>

Beg balance        $150000                   $50,000                      $200,000

Add: Addi shares  $40,000                                                       $40,000

Add: Net income                                    $30,000                     $30,000

Less: dividend                                         -$10000                     -$10000

Total                     $190,000                 $70,000                    $260,000

b. Balance sheet

Assets                          Amount                    

Cash                               $52,600                  

Supplies                         $13,400                

Prepaid rent                   $24,000                    

Land                               $200,000    

Total assets                   $290,000          

Liabilities       Amount

Account payable $9,100

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Total liabilities & stockholder equity $290,000

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3 years ago
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Answer:

A. N0

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C. NO

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is not constructively received in 2019 and the reason why the amount was not received was because been under the main contract terms she did not have the sole right to receive the income in the year 2020.

b. Freda's willingness to spread her salary over a longer period of time may be due to the fact that She may likely bargain for the payments reason been that she expects the payments to be in a lower marginal tax bracket in the year 2021

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6 0
3 years ago
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ABC, a U.S. company sends by fax an offer to sell to XYZ, a French company, 1,000,000 widgets for $1.00 a widget. XYZ sends back
galben [10]

Answer:

The correct option is B. False.

Further explanation is given below in the explanation section.

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Total Price = $1,000,000

Counter Offer from XYZ company to ABC Company.

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Total Price = 0.75 x 1,000,000 = $750,000

But in the end, ABC company sold its widgets to GHK company.

The correct option to this question is false.

This case is false because here ABC sends an original offer of $1 but XYZ sent a counter offer of $0.75. This counter offer was then duly rejected by ABC.

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5 0
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lutik1710 [3]

Answer: Increase by $250

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change\:in\:income=\frac{\$50}{1-0.8}

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3 years ago
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