Question

At the time of his death, Jason was a participant in Silver Corporation's qualified pension plan and group term life insurance. The balance of the survivorship feature in his pension plan is:Contributions by Silver $800,000After-tax contributions by Jason 400,000Plan earnings 300,000The term insurance has a maturity value of $100,000. All amounts are paid to Pam, Jason's daughter. One result of these transactions is:a.Jason's gross estate must include $1,200,000.b.Jason's gross estate must include $1,500,000.c.Pam must pay income tax on $300,000.d.Pam must pay income tax on $1,100,000.

Answer 1

Answer: d.Pam must pay income tax on $1,100,000.

Explanation:

Pam will have to pay income taxes on a couple of those accounts.

The first account will be the Employee contribution which means that the $800,000 by Silver is taxable.

She will also need to pay on the plan earnings which is $300,000.

Pam DOES NOT have to pay on her father's Contribution as those are After-tax contributions and NEITHER does she have to pay on the Insurance maturity value as that is not Taxable.

Adding the figures up then we have,

= $800,000 + $300,000

= $ 1,100,000

Pam will have to pay taxes on $1,100,000