Profit Sharing Plans:
A. Are fixed liabilities to the business.
B. Often allow companies to delay distribution of each employee's share.
C. Cannot be used along with other retirement programs.
D. Allow for a contribution of a specified proportion of company profits.
Ans: D. Allow for a contribution of a specified proportion of company profits.
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Archibald surrenders a life insurance policy and receives a lump-sum cash payment of $32,000. His premium payments up to the time of surrender amounted to $26,000. How is the surrender treated for tax purposes?
A) Archibald will receive $6,000 tax-free and will be taxed on his $26,000 cost basis. B) The full $32,000 is received tax-free. C) The full $32,000 is taxable as ordinary income. D) Archibald will receive his $26,000 cost basis tax-free and will be taxed on $6,000.
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