Scott owns a $200,000 whole life policy. His spouse, Charlene is sole beneficiary. The cash value of the policy is $50,000, and Scott has an outstanding policy loan of $20,000. Scott died in a car accident. What is the life insurance death benefit payable to Charlene?
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- John Benson, age 40, is single. His Social Security number is 111-11-1111, and he resides at 150 Highway 51, Tangipahoa, LA 70465. John has a 5-year-old child, Kendra, who lives with her mother, Katy. As a result of his divorce in 2016, John pays alimony of 6,000 per year to Katy and child support of 12,000. The 12,000 of child support covers 65% of Katys costs of rearing Kendra. Kendras Social Security number is 123-45-6789, and Katys is 123-45-6788. Johns mother, Sally, lived with him until her death in early September 2019. He incurred and paid medical expenses for her of 15,588 and other support payments of 11,000. Sallys only sources of income were 5,500 of interest income on certificates of deposit and 5,600 of Social Security benefits, which she spent on her medical expenses and on maintenance of Johns household. Sallys Social Security number was 123-45-6787. John is employed by the Highway Department of the State of Louisiana in an executive position. His salary is 95,000. The appropriate amounts of Social Security tax and Medicare tax were withheld. In addition, 9,500 was withheld for Federal income taxes and 4,000 was withheld for state income taxes. In addition to his salary, Johns employer provides him with the following fringe benefits. Group term life insurance with a maturity value of 95,000; the cost of the premiums for the employer was 295. Group health insurance plan; Johns employer paid premiums of 5,800 for his coverage. The plan paid 2,600 for Johns medical expenses during the year. Upon the death of his aunt Josie in December 2018, John, her only recognized heir, inherited the following assets. Three months prior to her death, Josie gave John a mountain cabin. Her adjusted basis for the mountain cabin was 120,000, and the fair market value was 195,000. No gift taxes were paid. During the year, John reported the following transactions. On February 1, 2019, he sold for 45,000 Microsoft stock that he inherited from his father four years ago. His fathers adjusted basis was 49,000, and the fair market value at the date of the fathers death was 41,000. The car John inherited from Josie was destroyed in a wreck on October 1, 2019. He had loaned the car to Katy to use for a two-week period while the engine in her car was being replaced. Fortunately, neither Katy nor Kendra was injured. John received insurance proceeds of 16,000, the fair market value of the car on October 1, 2019. On December 28, 2019, John sold the 300 acres of land to his brother, James, for its fair market value of 160,000. James planned on using the land for his dairy farm. Other sources of income for John are: Potential itemized deductions for John, in addition to items already mentioned, are: Part 1Tax Computation Compute Johns net tax payable or refund due for 2019. Part 2Tax Planning Assume that rather than selling the land to James, John is considering leasing it to him for 12,000 annually with the lease beginning on October 1, 2019. James would prepay the lease payments through December 31, 2019. Thereafter, he would make monthly lease payments at the beginning of each month. What effect would this have on Johns 2019 tax liability? What potential problem might John encounter? Write a letter to John in which you advise him of the tax consequences of leasing versus selling. Also prepare a memo addressing these issues for the tax files.Minnie owns a qualified annuity that cost 78,000. The annuity is to pay Minnie 650 per month for life after she reaches age 65. Minnie turns 65 on September 28, 2019, and receives her first payment on November 1, 2019. a. How much gross income does Minnie have from the annuity payments she receives in 2019? b. Shortly after receiving her payment on October 1, 2034, Minnie is killed in an automobile accident. How does the executor of Minnies estate account for the annuity on her return for the year 2034? c. Assume that the accident does not occur until November 1, 2043. How does the executor of Minnies estate account for the annuity on her 2043 return?Mrs. A took out a life insurance policy for 500,000 naming her son as beneficiary. Under the terms of the policy, the insurer, Filipinas Insurance Corporation will pay Mrs. A the amount of 500,000 after the 25th year of the policy, or her beneficiary should she die before that date. Mrs. A outlived the policy and received the proceeds. The premium paid on the policy was 400,000. The proceeds from the life insurance policy of Mrs. A is Exempt from income tax Taxable to the extent of 100,000 Taxable in full Taxable to the extent of 400,000
