Albert Had a Terminal Illness Which Required Almost Constant Nursing

question 56

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 $10,000 of premiums on the policy.The insurance company has offered to pay him $75,000 to cancel the policy, although its cash surrender value was only $60,000.Albert accepted the $75,000.Albert used $5,000 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 is not required to recognize any gross income because of his terminal illness.
• B)Albert must recognize $65,000 ($75,000 - $10,000) of gross income.
• C)Albert must recognize $10,000 ($75,000 - $60,000 - $5,000) of gross income.
• D)Albert must recognize $75,000 of gross income, but he has $5,000 of deductible medical expenses.
• E)None of the above.

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Definitions:

Mobile Service

A service provided by telecommunications companies that allows for voice, text, and data communication over mobile devices.

Midpoint Method

A technique used in economics for calculating elasticity by taking the average of the starting and ending prices and quantities to find a percentage change.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, reflecting the product's sensitivity to price changes.

Supply Curve

The supply curve is a graphical representation showing the relationship between the price of a good and the quantity of the good that suppliers are willing to sell.