Question

The annual increase in the cash surrender value of a life insurance policy:
a. Is taxed when the individual dies and the heirs collect the insurance proceeds.
b. Must be included in gross income each year under the original issue discount rules.
c. Reduces the deduction for life insurance expense.
d. Is not included in gross income each year because of the substantial restrictions on gaining access to the
policy's value.
e. None of the above.

Answer 1

Answer:

Option d: Is not included in gross income each year because of the substantial restrictions on gaining access to the policy's value

Explanation:

Cash Surrender Value is commonly known as the monetary amount an insured could get if there is a termination of policy that is before or earlier than maturity. It is also called a guarantee value.

Cash Surrender of Life Insurance policies is simply the outdated or a noncurrent investment with which a particular company is the beneficiary instead of the insured employees. The 1st few years of a policy, note that there is no cash surrender value that is attached to the policy but in course of the period, the entire insurance premium will be expense therefore dividends received from the life insurance policy forthwith are not recorded as revenue but recorded as an offset against insurance expense.