Life Insurance Proceeds. Don is the beneficiary of a $ 50,000 insurance policy on the life of his mother, Anna. To date, Anna has paid premiums of $ 16,000. What amount of gross income must be reported in each of the following cases?
· a. Anna elects to cancel the policy and receives $ 20,000, the cash surrender value of the policy.
· b. Anna dies and Don receives the face amount of the policy, $ 50,000.
· c. Anna dies and Don elects to receive $ 15,000 per year for four years.
I: 4-36
Transfer of Life Insurance. Ed is the beneficiary of a $ 20,000 insurance policy on the life of his mother. Because Ed needs funds, he sells the policy to his sister, Amy, for $ 6,000. Amy subsequently pays premiums of $ 9,000.
· a. How much income must Amy report if she collects the face value of the policy upon the death of her mother?
· b. Would Amy have to report any income if her brother had given her the policy? Assume the only payment she made was $ 9,000 for the premiums.
6-33
For or From AGI Deductions. Roberta is an accountant employed by a local firm. During the year, Roberta incurs the following unreimbursed expenses: