American College Exam HS330 Topic 3 Question 95 Discussion

Actual exam question for American College's HS330 exam

Question #: 95
Topic #: 3

On January 1, 2004 a father gave his daughter a $50,000 straight (ordinary) life insurance policy on his life. Premiums are paid annually. The pertinent facts about the policy are:

Date of issue: July 1, 1 992

Premium paid on July 1, 2003 $800

Terminal reserve on July 1, 2003 5,000

Terminal reserve on July 1, 2004 6,000

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

A$5400

B$5,800

C$5,900

D$50,000

Show Suggested Answer

Suggested Answer: C

by Erick at Aug 24, 2024, 02:04 AM

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Karl

12 days ago

Hold on, is this some kind of life insurance policy math riddle? I thought I signed up for a certification exam, not a puzzle game. Where's the 'none of the above' option when you need it?

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Dominga

13 days ago

I'm just going to go with C) $5,900. It's the most expensive option, and hey, maybe the question is trying to trick us. I'm feeling lucky!

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This is a tricky one. The terminal reserve on July 1, 2004 is $6,000, which suggests that the value of the policy has increased since the previous year. But I'm not sure if that's the correct way to calculate the gift tax value. Hmm, let me think about this...

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Aleshia

17 days ago

Wait, wait, wait. If the policy was issued on July 1, 1992 and the father gave it to his daughter on January 1, 2004, doesn't that mean the policy has been in effect for over 12 years? Shouldn't the value be the full $50,000 face value?

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Lashaun

17 days ago

I'm not sure, but I think the value of the policy for federal gift tax purposes is calculated based on the terminal reserve.

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Nathalie

18 days ago

I agree with Moira, the terminal reserve on July 1, 2004 is $6,000.

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Maricela

18 days ago

Hmm, the premium paid on July 1, 2003 was $800, and the terminal reserve on July 1, 2003 was $5,000. So the value of the policy should be the difference between these two, which is $5,800. That's got to be the correct answer, right?

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Moira

22 days ago

I think the answer is B) $5,800.

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American College Exam HS330 Topic 3 Question 95 Discussion

Contribute your Thoughts:

Karl

Dominga

Lemuel

Aleshia

Lashaun

Nathalie

Maricela

Moira