Sandy Is Married, Files a Joint Return, and Expects to Be

Essay

Sandy is married, files a joint return, and expects to be in the 28% marginal tax bracket for the foreseeable future.All of his income is from salary and all of it is used to maintain the household.He has a paid-up life insurance policy with a cash surrender value of $100,000.He paid $60,000 of premiums on the policy.His gain from cashing in the life insurance policy would be ordinary income.If he retains the policy, the insurance company will pay him $3,000 (3%) interest each year.Sandy thinks he can earn a higher return if he cashes in the policy and invests the proceeds.