Which Formula Shows the Needs Based Method of Estimating the Amount

question 2

Multiple Choice

Which formula shows the needs based method of estimating the amount of life insurance needed?

• A) Life insurance needed = present value of future income
• B) Life insurance needed = burial + education - food - shelter
• C) Life insurance needed = income + social security - savings
• D) Life insurance needed = total needs - existing assets to meet the needs

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Definitions:

Long-term Capital Gain

A profit from the sale of an asset held for more than a year, typically taxed at a lower rate than regular income.

Section 1245

A section of the U.S. Internal Revenue Code that defines the tax treatment of the gain from the sale of depreciable property.

Recapture

A process in which previously deducted or credited amounts are added back to taxable income or tax liability under certain conditions.

Short-term Capital Gain

A profit from the sale of an asset held for one year or less, taxed as ordinary income.