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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?
Suggested Answer: C
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29 comments · newest first
LU
Ludivina
10 months ago
Totally agree, the terminal reserve is key here!
TR
Tresa
11 months ago
Wait, how is it not the full $50k? That seems off.
TA
Tambra
11 months ago
Definitely leaning towards option C, $5,900 seems right.
YU
Yuki
11 months ago
I think the value for gift tax is based on the terminal reserve, so it’s not $50,000.
TE
Tegan
11 months ago
The terminal reserve on July 1, 2004 is $6,000.
CO
Coral
12 months ago
I feel like the answer should be the face value of the policy, which is $50,000, but I know there are specific rules for gift tax valuation that might change that.
GI
Gilma
12 months ago
This question seems similar to one we practiced where we had to determine the value of a policy based on reserves. I think it might be around $5,800, but I could be wrong.
SA
Salome
12 months ago
I remember something about using the terminal reserve and the premiums paid, but I can't recall if we add or subtract them for the gift tax value.
CA
Catalina
1 year ago
I think the value for gift tax purposes might be related to the terminal reserve, but I'm not sure how to calculate it exactly.
BR
Brittni
1 year ago
Ah, I've seen questions like this before. I'm confident I can work through this systematically and arrive at the right solution.
LA
Latrice
1 year ago
This seems straightforward enough. I just need to plug the numbers into the right formula and I should be able to arrive at the correct answer.
MA
Marisha
1 year ago
I'm a bit confused by all the dates and numbers here. Let me re-read the question and see if I can break it down into simpler steps.
JA
Janae
1 year ago
Hmm, this looks like a tricky insurance policy question. I'll need to carefully review the details and think through the calculation step-by-step.
DU
Dulce
1 year ago
Okay, I think I can handle this. The key is figuring out the terminal reserve values and how they relate to the gift tax value.
JO
Jose
1 year ago
This question seems pretty straightforward. I'll need to review the available Engine Services in Alfresco Process Services to determine which one is not applicable.
KA
Karl
1 year 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?
SH
Sheron
1 year ago
B) $5,800
DA
Daniel
1 year ago
A) $5,400
DO
Dominga
1 year 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!
LE
Lemuel
2 years ago
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...
RI
Rima
1 year ago
I'm not sure, but I think it might be B) $5,800 because the premium paid was $800.
SU
Sunny
1 year ago
B) $5,800
SH
Shawnda
1 year ago
I think it's A) $5,400 because the terminal reserve increased by $1,000 from the previous year.
TE
Tegan
1 year ago
A) $5,400
AL
Aleshia
2 years 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?
LA
Lashaun
2 years 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.
NA
Nathalie
2 years ago
I agree with Moira, the terminal reserve on July 1, 2004 is $6,000.
MA
Maricela
2 years 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?
MO
Moira
2 years ago
I think the answer is B) $5,800.