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kanba
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Joined: 06 Nov 2011
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Posted: 08 Nov 2011 at 17:59 \| IP Logged

Under a $150000 insurance policy on her deceased father's life, May Green is to receive $12000 per year for 15 years. Of the 12000 received in the current year, the amount subject to income tax is : $2000. The explaination showed that Amount received in current yr (12000)less return of principal(10000+150000/15yrs) eaquals the taxable interest (2000).

I have no idea with this explanation. I think the $150000 is the total life insurance proceed, so for current yr, nothing should be included in return even though we received 12000 this year. I think life insurance proceed is nontaxable. Can anyone help me to explan it?

divyagovil1
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Joined: 30 Jan 2009
Location: India
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Posted: 15 Nov 2011 at 01:25 \| IP Logged

True, Life Insurance proceeds are nontaxable.

However, any interest received on life insurance is
"taxable".

Refer the link:
http://www.irs.gov/faqs/faq/0,,id=199751,00.html

In the above question,
insurance policy is for $150,000 (Principal)
amount received for 15 years would be $12,000 per year *
15 years = $180,000

Thus, interest = amount received - principal = 180,000 -
150,000 = $30,000

Interest income per year = 30,000/15 years = $2000
which is subject to income tax

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molly1420
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Posted: 24 Nov 2011 at 09:38 \| IP Logged

All life insurance proceeds are non-taxable you can refer to the list of insurance companies but the interest on the insured amount in some policies.

conry
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Posted: 11 Jun 2012 at 02:27 \| IP Logged

Life insurance helps secure your familys financial future
after the death of you and/or your spouse. It also helps
ensure that the estate that youve worked your life to
build will be allocated to the beneficiaries you have
chosen.

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Life Insurance For Over 50

allanarlen
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Joined: 20 Jun 2012
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Posted: 21 Jun 2012 at 17:36 \| IP Logged

Life insurance proceed are really easy and life insurance is necessary for all. Life insurance is really good to giving a money to your family after your death. So that's really main advantages for life insurance is safe your family future easily. And life insurance proceed are really easy for all so you can get it easy.

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