When Betty Was Diagnosed as Having a Terminal Illness, She

When Betty was diagnosed as having a terminal illness, she sold her life insurance policy to Insurance Purchase,
Inc., a company that is licensed to invest in these types of contracts.Betty sold the policy for $32,000, and Insurance Purchase, Inc.became the beneficiary.She had paid total premiums of $19,000.Betty died eight months after the sale.Insurance Purchase, Inc., collected $50,000 on the policy.The company had paid additional premiums of $4,000 on the policy.Betty's estate is not required to recognize a $13,000 gain from the sale of her life insurance policy; and Insurance Purchase, Inc.is required to recognize a $14,000 gain from the insurance policy.

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