The Annual Increase in the Cash Surrender Value of a Life

question 41

Multiple Choice

The annual increase in the cash surrender value of a life insurance policy:

• A)Is taxed when the individual dies and the heirs collect the insurance proceeds.
• B)Must be included in gross income each year under the original issue discount rules.
• C)Reduces the deduction for life insurance expense.
• D)Is not included in gross income each year because of the substantial restrictions on gaining access to the policy's value.
• E)None of these.

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Definitions:

Equilibrium Quantity

The quantity of goods or services that is supplied is exactly equal to the quantity demanded at the equilibrium price.

Commodity X

A placeholder term for any generic, interchangeable good or service in economic analysis.

Demand Equation

A mathematical expression that relates the quantity demanded of a good to its price and other factors influencing demand, typically in the form of Qd = f(P, ...), where Qd is quantity demanded, P is price, and ... represents other determinants.

Equilibrium Quantity

The quantity of goods or services supplied is equal to the quantity demanded at the market equilibrium price.