American College Exam HS330 Topic 1 Question 111 Discussion

Actual exam question for American College's HS330 exam

Question #: 111
Topic #: 1

On January 1, 2004 a father gave his daughter a $200,000 straight (ordinary) life insurance policy on his life. Premiums are paid annually. The pertinent facts about the policy are:

Date of issue: July 1, 1992

Premium paid on July 1, 2003 $3200

Terminal reserve on July 1, 2003 20,000

Terminal reserve on July 1, 2004 24,000

What is the value of the policy for federal gift tax purposes?

A$ 21,600

B$23,200

C$23,600

D$200,000

Show Suggested Answer

Suggested Answer: C

by Luisa at Apr 29, 2025, 08:51 PM

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Carey

4 days ago

Hah, this question is a piece of cake! The answer is clearly C) $17,700. Anyone who doesn't get this is a real numbskull, am I right?

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Wava

5 days ago

I think the answer is B) $17,400. The terminal reserve on July 1, 2003 was $20,000, and the premium paid on July 1, 2003 was $3,200. So the value of the policy should be $20,000 + $3,200 = $17,400.

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Sabra

8 days ago

That's a good point, Florencia. The premium paid in 2003 should also be factored in when calculating the value of the policy.

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Florencia

9 days ago

I'm not sure, but I think we need to consider the premium paid in 2003 as well.

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Karl

10 days ago

I agree with Sabra, the terminal reserve increased by $4,000 from 2003 to 2004.

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The correct answer is C) $17,700. The value of the policy is the terminal reserve on July 1, 2004, which is $24,000. Since the father paid a premium of $3,200 on July 1, 2003, the value of the policy for federal gift tax purposes is $24,000 - $3,200 = $17,700.

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Veda

6 days ago

I think the answer is C) $17,700.

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Sabra

25 days ago

I think the answer is C) $17,700.

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American College Exam HS330 Topic 1 Question 111 Discussion

Contribute your Thoughts:

Carey

Wava

Sabra

Florencia

Karl

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Veda

Sabra