Question

Camp Company pays life insurance premiums on the life of their president and vice president. They...

Camp Company pays life insurance premiums on the life of their president and vice president. They pay $280 premiums monthly on the life of the president, and $106 premiums monthly on the life of the vice president, for 12 months of the year.

The Company has had a loan for several years. The terms of this loan from the bank requires the assignment of the President's life insurance policy as collateral for the loan.

This year, on April 1, the Company obtained additional financing. On this loan, the bank requires the assignment of the Vice President's life insurance policy as collateral for the loan, as well.

Considering the terms of these two outstanding loans, what amount of the life insurance premiums paid would not be deductible this year: ？？？.( Calculate the answer by read surrounding text. . This amount would need to be added back to accounting net income to reconcile to net income for tax purposes. )

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Answer #1

WHAT IS INSURANCE POLICY LOAN :

A policy loan is issued by an insurance company and uses the cash value of a person’s life insurance policy as collateral. Sometimes it is referred to as a Life insurance loan. Traditionally, policy loans were issued at a very low-interest rate, but that is no longer universally true. If a borrower fails to repay a policy loan, the money is withdrawn from the insurance death benefit.

AMOUNT WHICH CANNOT BE DEDUCTIBLE UNDER 80C :

As vice president is in Collateral  , he cannot be allowed for deduction..

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