Albert had a terminal illness that would require almost constant nursing care for the remaining two years of his estimated life, according to his doctor. Albert had a life insurance policy with a face amount of $100,000. He had paid $25,000 of premiums on the policy. The insurance company has offered to pay him $80,000 to cancel the policy, although its cash surrender value was only $55,000. He accepted the $80,000. Albert used $15,000 to pay his medical expenses. Albert made a miraculous recovery and lived another 20 years.

Required:
What are the tax consequences for Albert when he cashed out the policy?

There will be no such tax consequence for Albert when he cashed out the policy. This is because of the fact that he qualified for death benefit exclusion for his Life insurance policy

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swatiupadhyay714 swatiupadhyay714 · Answer 2 · 2022-01-02T20:12:47+01:00

Albert's tax consequences when he cashed out the policy are as follows:

Because of his terminal illness, Albert is not required to recognize any gross income.

In the incident that a policyholder is unable to work due to a disabling illness or injury, disability insurance policies provide financial assistance. It provides monthly assistance to help people pay off debts like mortgages and credit cards.

Individuals can purchase short-term and long-term disability insurance, but due to the high cost, long-term policies are typically obtained only by those with six-figure incomes, such as doctors, lawyers, and other professionals.

Short-term disability insurance pays a monthly stipend to cover health fees and other vital fees for a time frame of up to six months.

To know more about the tax consequences for Albert when he after the crash of the policy, refer to the link below:

https://brainly.com/question/4538169