Final answer:
In a Buy-Sell Agreement (Cross Purchase Plan) with four equal partners and a business worth $1,800,000, each partner needs a life insurance policy worth $450,000 to cover the cost of buying out another partner's share. Option C is correct.
Step-by-step explanation:
The subject of this question is the determination of the insurance policy value that each partner should hold in a Buy-Sell Agreement (Cross Purchase Plan) involving four equal partners, where the business valuation is $1,800,000. Under such an agreement, each partner would typically buy a life insurance policy on the other partners. The purpose of this is to allow the remaining partners to buy out the deceased partner's interest in the partnership.
To calculate the amount of the policy for each partner, you divide the total value of the business ($1,800,000) by the number of partners (4), giving each partner an equal share of $450,000. Since each partner needs enough insurance to buy out just one partner's share, the policy on the life of each partner would be $450,000.
Therefore, the correct answer is: C. $450,000.