9Oa)Ob)Oc)Od)UChong is starting a winery business in his home town of Kelowna, British Columbia. Chong needs money to get started.He has a permanent policy on his own life with a cash surrender value (CSV) of $1 million and is considering using theCSV to secure a loan, as requested by his lender. Chong only needs to assign a portion of the policy and he isconsidering a partial collateral assignment of $500,000. Which of the statements below about Chong's partial collateralassignment is correct?To secure their interest during the term of the loan, the lender becomes owner of the policy.Chong retains ownership of the policy and can make policy withdrawals as desired.If the loan is still outstanding when Chong dies, the lender has first rights on the full death benefit.If Chong defaults on the loan while he is alive, the lender can force a surrender of the policy to recover the unpaid loanbalance.

A permanent life insurance policy is a type of life insurance that remains in effect for the…

Answered: ery business in his She town of…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter4: Gross Income

Section: Chapter Questions

Problem 2RP

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Roy decides to buy a personal residence and goes to the bank for a $150,000 loan. The bank tells him that he can borrow the funds at 4% if his father will guarantee the debt. Roy's father, Hal, owns a $150,000 CD currently yielding 3.5%. The Federal rate is 3%. Hal agrees to either of the following: Roy borrows from the bank with Hal's guarantee to the bank. Hal cashes in the CD (with no penalty) and lends Roy the funds at 2% interest. Hal is in the 32% marginal tax bracket. Roy, whose only source of income is his salary, is in the 12% marginal tax bracket. The interest Roy pays on the mortgage will be deductible by him.
Roy decides to buy a personal residence and goes to the bank for a $150,000 loan. The bank tells him that he can borrow the funds at 4% if his father will guarantee the debt. Roy's father, Hal, owns a $150,000 CD currently yielding 3.5%. The Federal rate is 3%. Hal agrees to either of the following: Roy borrows from the bank with Hal's guarantee to the bank. Hal cashes in the CD (with no penalty) and lends Roy the funds at 2% interest. Hal is in the 32% marginal tax bracket. Roy, whose only source of income is his salary, is in the 12% marginal tax bracket. The interest Roy pays on the mortgage will be deductible by him. Considering only the tax consequences, answer the following. a. The loan guarantee:Hal's interest income from the CDs would be $ before taxes and $ after taxes. Roy's interest expense from the bank loan would be $ before taxes and $ after taxes. This arrangement would produce an overall cash flow after taxes to the family of $. b. The loan from Hal to Roy:Hal's tax…
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