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C is 53 and owns a $100,000 life insurance policy on her life with $30,000 cash value. What tax will C need to pay if she cancels the policy and elects to receive the cash value as a lump sum?
Options
a. C will need to pay tax only on that portion of the cash value that exceeds the amount of premium she paid.
b. C needs to pay a 10% penalty and income tax on the entire amount withdrawn.
c. C only needs to pay estate tax on the cash value.
d. No tax is payable on the cash value of a life insurance policy.
Answer: A
The above question C is 53 and owns a $100,000 life insurance policy on her life with $30,000 cash value. What tax will C need to pay if she cancels the policy and elects to receive the cash value as a lump sum?, Was part of Insurance MCQs & Answers. I hope you got the correct answer to your question. Have a great time ahead.
