Albert Had a Terminal Illness Which Required Almost Constant Nursing

question 9

Multiple Choice

Albert had a terminal illness which required 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. Albert 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. Albert accepted the $80,000. Albert used $15,000 to pay his medical expenses. Albert made a miraculous recovery and lived another 20 years. As a result of cashing in the policy:

• A) Albert must recognize $55,000 of gross income, but he has $15,000 of deductible medical expenses.
• B) Albert must recognize $65,000 ($80,000 - $15,000) of gross income.
• C) Albert must recognize $40,000 ($80,000 - $25,000 - $15,000) of gross income.
• D) Albert is not required to recognize any gross income because of his terminal illness.
• E) None of these.

---

Definitions:

Hydrophobic

Not readily interacting with water; having less affinity for water molecules than they have for each other. Compare with hydrophilic.

Nonpolar

A type of covalent bond where electrons are shared equally between atoms, leading to a molecule that does not have distinct poles or charges.

Glycogen

The principal storage polysaccharide in animal cells; formed from glucose and stored primarily in the liver and, to a lesser extent, in muscle cells

Cellulose

A structural polysaccharide consisting of beta glucose subunits; the main constituent of plant primary cell walls.