Question

Simon is borrowing $1,000,000 from his credit union to fund the construction of an apartment building. The loan is being secured by a collateral assignment of Simon's $2,000,000 life insurance policy as per his bank's request. This policy has an ACB of $280,000 and a CSV of $450,000. Simon's annual premium is $15,000, with an NCPI of $10,000. Given this scenario what amount can Simon deduct from his income taxes?

Answer 1

Simon's tax deductions related to his life insurance policy used as collateral will depend on specific tax rules, which can be clarified by a tax professional or through the relevant tax legislation.

Step-by-step explanation:

The amount Simon can deduct from his income taxes depends on the specific rules for tax deductions related to life insurance policies used as collateral for loans, which can vary based on jurisdiction and the specifics of the tax code. Typically, the net cost of pure insurance (NCPI) can be considered when calculating deductions. However, in this scenario, the question does not provide enough information to determine the exact amount of the tax deduction. Simon should consult a tax professional or refer to his country's tax legislation for guidance on how his life insurance policy factors into tax deductions when used as collateral for a loan.