1 Participating dividends and any amount over the premiums paid is taxable
2 The cash amount plus the interest earned on policies loans plus dividends less premiums paid are taxable.
3 Only the surrender amount less the premiums paid is taxable
4 Only interest earned and dividends are taxable
2006-07-30 04:57:30 · 6 answers · asked by Anonymous in Business & Finance ➔ Insurance
It's not 1, since any dividends you receive means you are overpaying your premiums. Its defined as a refund in insurance industry.
It's not 2. Since any interest on policy loans has no relation to you. Only the company has to report it. Its like paying interest on credit card bills.
The answer is 3. When you surrender a policy, you are subjected to surrender charges and taxes. The IRS recognize you have receive additional income and you will be tax at ordinary income tax rate.
It's not 4 since interest earned on policies are tax-deferred.
2006-07-30 08:05:09 · answer #1 · answered by Anonymous · 1⤊ 0⤋
3 -- dividends in a participating policy are not taxable. Interest they earn is -- if they are left to accumulate at interest.
2006-07-31 23:03:17 · answer #2 · answered by BShakey 4 · 0⤊ 0⤋
Dividends in Life Insurance is a return of excess premium. By Definition!
With that understood, unless you got a HUGE %'age return on the DIVIDENDS, I wouldn't THINK that you would be TAXED at ALL!!
SEE AN ACCOUNTANT!!
2006-08-06 21:17:28 · answer #3 · answered by thewordofgodisjesus 5 · 0⤊ 0⤋
anything gained over the amount paid in to the policy is taxable
2006-07-31 23:08:59 · answer #4 · answered by Carrie 2 · 0⤊ 0⤋
To borrow an expression from Mr T ...
Pity the fool ... who has to cut and paste his homework online because he can't read the textbook.
And pity the fool ... who hires him.
2006-08-05 17:13:45 · answer #5 · answered by one_observation 3 · 0⤊ 0⤋
1., but you realize this NEVER happens in the real world.
2006-07-30 15:08:43 · answer #6 · answered by Anonymous 7 · 0⤊ 0⤋