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

2 months 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

2 months 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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Rima

1 months ago

I'm not sure, but I think it might be B) $5,800 because the premium paid was $800.

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Sunny

1 months ago

B) $5,800

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Shawnda

1 months ago

I think it's A) $5,400 because the terminal reserve increased by $1,000 from the previous year.

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Tegan

2 months ago

A) $5,400

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Aleshia

2 months 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

2 months 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

2 months ago

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

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Maricela

2 months 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

3 months 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

Sheron

Daniel

Dominga

Lemuel

Rima

Sunny

Shawnda

Tegan

Aleshia

Lashaun

Nathalie

Maricela

Moira