Tracy transfers to Glen a life insurance policy with a face value of $40,000 and a cash value of $8,000 in payment of a personal debt.Glen continues to make premium payments on the policy until Tracy's death.At that time, Glen had paid $3,500 in premiums.
a.How much income must Glen report when he receives the $40,000 in proceeds?
b.Would your answer be different if Tracy were a shareholder and CEO of a corporation to which the policy was transferred? Why?

Question

Tracy transfers to Glen a life insurance policy with a face value of $40,000 and a cash value of $8,000 in payment of a personal debt.Glen continues to make premium payments on the policy until Tracy's death.At that time, Glen had paid $3,500 in premiums.
a.How much income must Glen report when he receives the $40,000 in proceeds?
b.​Would your answer be different if Tracy were a shareholder and CEO of a corporation to which the policy was transferred? Why?

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The Answer of Tracy transfers to Glen a life insurance policy with a face value of $40,000 and a cash value of $8,000 in payment of a personal debt.Glen continues to make premium payments on the policy until Tracy's death.At that time, Glen had paid $3,500 in premiums.
a.How much income must Glen report when he receives the $40,000 in proceeds?
b.​Would your answer be different if Tracy were a shareholder and CEO of a corporation to which the policy was transferred? Why?

Tracy Transfers to Glen a Life Insurance Policy with a Face