Final answer:
The incorrect statement about individual life insurance tax liabilities is that policy loans are taxable as income; they are not, because they're loans that must be repaid and are not income.
Step-by-step explanation:
The question relates to the tax liabilities for individual life insurance policies. Among the statements provided, the one that is not true is:
b. Policy loans are taxable as income.
Here is the clarification for each statement:
- a. If a policy is surrendered for its cash value, the gains on the cash value above the premiums paid are subject to ordinary income tax.
- b. Policy loans are generally not taxable as long as the policy is in force, although they may be subject to interest.
- c. Policy premiums are not typically deductible on personal taxes for individual life insurance policies.
- d. Accelerated benefits are tax-free if they meet certain qualifications related to serious health conditions.
Overall, policy loans are not considered taxable because they are technically not income; rather, they are loans that must be repaid.