Question

Howard is the owner of 4 different insurance policies. Which of the following policies have death benefits proceeds that are NOT subject to income tax upon death of the insured?

1) Policy 1; his wife is the insured.
2) Policy 2; his business partner is the insured.
3) Policy 3; his daughter is the insured.
4) Policy 4; he is the insured.

Answer 1

All death benefits from life insurance policies mentioned in the question, regardless of who the insured individual is, are not subject to income tax for the beneficiaries. This applies to policies where Howard's wife, business partner, daughter, or Howard himself is the insured.

Step-by-step explanation:

The student is asking about the tax implications of death benefits from insurance policies upon the death of the insured. In general, death benefits from life insurance policies are not subject to income tax for the beneficiaries, regardless of who the insured individual is or their relation to the policy owner. This means that whether the insured person is Howard's wife, business partner, daughter, or Howard himself, the death benefits from these policies are typically paid out tax-free to the designated beneficiaries.

It's important to note, however, that there may be other taxes, such as estate tax, that could apply depending on the size of the estate and other factors. For the purpose of this question, focusing on income tax, the proceeds from all four mentioned policies, including Policy 1, Policy 2, Policy 3, and Policy 4, would not be subject to income tax.