Ch_5_Questions - Income Tax I Name _Christian Yimgnia_...

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Income Tax I Name __Christian Yimgnia__________ Chapter 5 Questions (80 pts) Explain and/or discuss the following based on reading the chapter and viewing the power points. Be thorough with your answers. You may take all the space you need. 1. An individual surrenders, for $20,000 an endowment life insurance policy in which he had paid $15,000 in premiums. How much, if any, of the $20,000 must be included in gross income? $5,000 should be included in gross income and be taxed. By law premiums on life insurance policies are not deductible by the insured and only the interest is. 2. On Series EE US Savings Bonds, what are the two choices for reporting interest income? On series EE bonds, no interest per se is paid each year but the bond is issued at a discount and each year increases in value until maturity. However cash basis taxpayers have the choice of reporting interest income on a yearly basis or reporting all interest income when the bonds finally mature. Whereas, accrual basis taxpayers must accrue the increase in the redemption value each year as
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Ch_5_Questions - Income Tax I Name _Christian Yimgnia_...

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