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Choices "b", "c", and "d" are incorrect, per the above explanation. CPA-02198 Type1 M/C 98. CPA-02198 Nov 89 II #42 A-D Corr Ans: D PM#4 R 3-99 Page 21 Kell Corp.
Income statement for the year ended December 31, 1988:
Cost of sales
Gain on sale of investments
Life insurance policy proceeds
Income before income tax $900,000
78,000 28,000 8,000
$70,000 The life insurance policy proceeds represent a lump sum payment in full as a result of the death of Kell's
controller. Kell was the owner and beneficiary of this policy. In its 1988 income tax return, Kell should
report taxable life insurance proceeds of:
Choice "d" is correct. $0.
Rule: Proceeds from insurance on the death of an officer where the corporation is the beneficiary are not
includible in the taxable income of a corporation.
Choices "a", "b", and "c" are incorrect, per the above explanation. CPA-02202 Type1 M/C A-D Corr Ans: C PM#5 R 3-99 48
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