Final answer:
When a beneficiary receives a life insurance policy in exchange for valuable consideration from a person other than the insurance company, it is treated as a transfer for value, which may have tax consequences.
Step-by-step explanation:
When a beneficiary receives a life insurance policy in exchange for valuable consideration from a person other than the insurance company, it is treated as a transfer for value. A transfer for value occurs when the ownership of a life insurance policy changes hands in exchange for something of value, such as money or property. In such cases, the tax treatment of the policy changes, and the beneficiary may be subject to tax consequences based on the policy's cash value and the amount paid for it.