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Tax.appeal.168
Tax.appeal.168, Tax Accountant
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I received a check from my insurance company (MetLife) for

Customer Question

I received a check from my insurance company (MetLife) for $20,000. This $20,000 represents the cash surrender value of my whole life insurance policy. The amount of this cash surrender value that represents gains over and above what I contributed was $2500 (MetLife calls this accumulated dividends).
How much if any of this $20,000 cash surrender value is taxable and on which schedule do I report this income?
Submitted: 1 year ago.
Category: Tax
Expert:  Tax.appeal.168 replied 1 year ago.

Q: How much if any of this $20,000 cash surrender value is taxable and on which schedule do I report this income?

A: The taxable amount will depend if there is an excess amount above the premiums. SEE BELOW:

If the CSV is more than the premiums and you surrender the policy, the excess is earnings and taxable income. For example, if you paid $1,000 in policy premiums for 20 years and you cash in the policy and receive $30,000, you'll pay ordinary income tax on $10,000 in earnings.

You should receive a Form 1099-R showing the total proceeds and the taxable part. Report these amounts on lines 16a and 16b of Form 1040.

REFERENCE SOURCE:

http://www.bankrate.com/finance/taxes/is-cash-surrender-value-of-insurance-taxed.aspx

Let me know if you require further assistance with this matter.

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