Answered

Get the answers you need at Westonci.ca, where our expert community is always ready to help with accurate information. Ask your questions and receive detailed answers from professionals with extensive experience in various fields. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform.

Fifteen years ago, Lenny purchased an insurance policy on his own life. The policy provides a $3 million death benefit. Lenny has paid $682,000 of premiums, and the cash surrender value of the policy is $725,000. He plans to liquidate the policy to generate cash for his business. If Lenny's marginal tax rate is 35%, how much after-tax cash will the liquidation generate

Sagot :

Lenny will generate $471,250 after-tax cash.

What is an insurance policy?

  • The insurance policy, which establishes the claims that the insurer is legally obligated to pay, is a contract between the insurer and the policyholder.
  • The insurer guarantees to reimburse losses brought on by risks covered by the policy language in return for an upfront payment known as the premium.

What is a cash surrender value?

  • If a policyholder or the owner of an annuity contract chooses to cancel their policy before it matures or an insured event occurs, the insurance company will give them the cash surrender value as compensation.

Solution -

Money Lenny will get = $725,000.

Subtract the tax to find the money Lenny will get.

35% of 725,000 = $253,750.

[tex]725,000 - 253,750 = 471,250[/tex]

Therefore, Lenny will generate $471,250 after-tax cash.

Know more about compensation here:

https://brainly.com/question/19646648

#SPJ4

Visit us again for up-to-date and reliable answers. We're always ready to assist you with your informational needs. We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. We're dedicated to helping you find the answers you need at Westonci.ca. Don't hesitate to return for more.