Dividends on life insurance policies are generally excludable income because they are considered a return of premium.

Name: Dividends on life insurance policies are generally excludable income because they are considered a return of premium.
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Dividends on life insurance policies are paid out of the company's surplus and are considered a return of premium. Therefore, they are not taxable income and are generally excluded from income.

Dividends on Life Insurance Policies Are Generally Excludable Income Because