Question

Leland pays premiums of $19,750 for an insurance policy in the face amount of $98,750 upon...

Leland pays premiums of $19,750 for an insurance policy in the face amount of $98,750 upon the life of Caleb and subsequently transfers the policy to Tyler for $29,625. Over the years, Tyler pays subsequent premiums of $5,925 on the policy. Upon Caleb's death, Tyler receives the proceeds of $98,750.

As a result, what amount is Tyler required to include in his gross income?

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Answer #1

Tyler required to include in his gross income = $ 63,200

Working note

Total Premium Received - $ 98,750

Less : Amount transfers to Policy - ($ 29,625)

Less: Subsequent premium paid - ($5,925)

Gross income = $63,200

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