Ben Was Diagnosed with a Terminal Illness

question 89

Multiple Choice

Ben was diagnosed with a terminal illness.His physician estimated that Ben would live no more than 18 months. After he received the doctor's diagnosis, Ben cashed in his life insurance policy and used the proceeds to take a trip to see relatives and friends before he died. Ben had paid $12,000 in premiums on the policy, and he collected $50,000, the cash surrender value of the policy.Henry enjoys excellent health, but he cashed in his life insurance policy to purchase a new home.He had paid premiums of $12,000 and collected $50,000 from the insurance company.

• A)Neither Ben nor Henry is required to recognize gross income.
• B)Both Ben and Henry must recognize $38,000 ($50,000 - $12,000) of gross income.
• C)Henry must recognize $38,000 ($50,000 - $12,000) of gross income, but Ben does not recognize any gross income.
• D)Ben must recognize $38,000 ($50,000 - $12,000) of gross income, but Henry does not recognize any gross income.
• E)None of the above.

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Definitions:

Zheng He

A Chinese mariner, explorer, diplomat, and fleet admiral during China's early Ming Dynasty, who led expeditions throughout Southeast Asia, South Asia, the Middle East, and East Africa from 1405 to 1433.

Africa

The world's second-largest and second-most populous continent, rich in cultural diversity, natural resources, and history.

English Law

The legal system of England and Wales, characterized by common law principles, parliamentary statutes, and legal precedents.

Legal Rights

Rights that are bestowed upon individuals by the legal system, including civil, political, and social rights protected by law.