Sixteen years ago, Ms. Cole purchased a $524,000 insurance policy on her own life and named her son as sole beneficiary. She has paid $32,488 total premiums to keep this policy in force.

1. This year, she liquidates the policy for its $40,348 cash surrender value. Does she recognize income on the liquidation?
2. Now assume that Ms. Cole is terminally ill. The insurance policy provides that a person with a life expectancy of less than one year can liquidate the policy and receive 80 percent of the death benefit. She does so and receives a $419,200 accelerated death benefit. Does she recognize income on the liquidation?

Required A Required B This year, she liquidates the policy for its $40,348 cash surrender value. Does she recognize income on the liquidation? Does she recognize income on the liquidation? Recognized Income Required A Required B IIIIIIIIIIIIIIIIIIII Now assume that Ms. Cole is terminally ill. The insurance policy provides that a person with a life expectancy of less than one year can liquidate the policy and receive 80 percent of the death benefit. She does so and receives a $419,200 accelerated death benefit. Does she recognize income on the liquidation?.. TITULLULIITTIMULUTUULILULILULILULILULILULUI Does she recognize income on the liquidation? Recognized Income