2-15 (Algorithmic) Life Insurance (LO 2.8) Sharon transfers to Russ a life insurance policy with a cash surrender value of $24,800 and a face value of $74,400 in exchange for real estate, Russ continues to pay the premiums on the policy until Sharon dies 7 years later. At that time, Russ has paid $11,160 in premiums, and he collects the $74,400 face value. How much of the proceeds, if any, is taxable to Russ? Why? 68,200 X Since the policy was transferred for valuable consideration, the proceeds are taxable to the extent that they exceed the sum of the cash value at the time of transfer plus the premiums paid. Check My Wor Life insurance proceeds normally are excluded from gross income when paid to the beneficiary by reason of the death of the insured. However, an insurance policy transferred for valuable consideration may be taxable to the recipient