4.4.1 Basic Quiz -- Valuing the Insurance Charitable Gift

Many individuals own life insurance at some time in their lives.

True False

As an individual's situation changes over time, a life insurance policy may no longer be needed for its original purpose.

True False

A donor who wants to make a gift of a life insurance policy must create an insurance trust with charity as the remainder.

True False

To complete a transfer of an insurance policy, the donor will need to contact the insurance company and fill out the proper change of ownership forms.

True False

An outright gift of a life insurance policy will produce a charitable income tax deduction equal to the lesser of the policy's value or the donor's basis in the policy.

True False

The replacement value of an insurance policy is the cost to purchase an identical policy given the donor's age and health.

True False

An individual who decided to surrender his or her insurance policy for cash would realize taxable ordinary income equal to the excess of the policy's value over the cost basis.

True False

The transfer of a life insurance policy to charity should not trigger any income tax liability.

True False

Viatical settlements involve the sale of life insurance policies for other more favorable policies.

True False

In general, the proceeds from accelerated benefits and viatical settlements are tax exempt.