Question

Which of the following statements is not True about the tax liabilities for individual life insurance policies?

A) Death benefits received by beneficiaries are generally not subject to federal income tax.

B) Cash value growth within the policy is tax-deferred.

C) Premiums paid for individual life insurance policies are tax-deductible.

D) Policy loans are generally not considered taxable income.

Answer 1

The incorrect statement regarding tax liabilities for individual life insurance policies is that premiums are tax-deductible, which they are not. Death benefits, cash value growth, and policy loans follow specific tax rules outlined by the IRS.

Step-by-step explanation:

Among the options provided about tax liabilities for individual life insurance policies, the statement that is not true is that C) Premiums paid for individual life insurance policies are tax-deductible. Typically, the premiums paid by individuals for their life insurance policies are not tax-deductible. In contrast, death benefits received by beneficiaries are usually not subject to federal income tax, cash value growth in a policy is tax-deferred, and policy loans are not considered taxable income until they exceed the amount of premiums paid.