Walter is terminally ill and has a 20-year level term life insurance policy with a face value of $500,000. Walter has paid $15,000 in premiums over the last ten years. Walter sells the term policy to a company that specializes in viatical settlements. Walter sells the policy for $400,000. What is the tax impact to Walter and the viatical settlement company at Walter's death? Walter has taxable income of $385,000, company has taxable income of $100,000. Walter has taxable income of $400,000, company has taxable income of $100,000. Walter has taxable income of $0, company has taxable income of $100,000. Walter has taxable income of $0, company has taxable income of $500,000.
Walter is terminally ill and has a 20-year level term life insurance policy with a face value of $500,000. Walter has paid $15,000 in premiums over the last ten years. Walter sells the term policy to a company that specializes in viatical settlements. Walter sells the policy for $400,000. What is the tax impact to Walter and the viatical settlement company at Walter's death? Walter has taxable income of $385,000, company has taxable income of $100,000. Walter has taxable income of $400,000, company has taxable income of $100,000. Walter has taxable income of $0, company has taxable income of $100,000. Walter has taxable income of $0, company has taxable income of $500,000.
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 23CE
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Walter is terminally ill and has a 20-year level term life insurance policy with a face value of $500,000. Walter has paid $15,000 in premiums over the last ten years. Walter sells the term policy to a company that specializes in viatical settlements. Walter sells the policy for $400,000. What is the tax impact to Walter and the viatical settlement company at Walter's death?
Walter has taxable income of $385,000, company has taxable income of $100,000.
Walter has taxable income of $400,000, company has taxable income of $100,000.
Walter has taxable income of $0, company has taxable income of $100,000.
Walter has taxable income of $0, company has taxable income of $500,000.
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