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Cody has a life insurance policy with a $25,000 cash value. Which of the following does the IRS Code Section 1035 require for Cody to surrender the policy and not pay any income tax on any of the cash value amount?

A. Cody must surrender the policy for another life insurance policy and have the cash value sent directly from the first insurer to the second insurer.
B. Cody must exchange the policy for another life insurance policy and deposit the cash value directly into a trust account where it will stay until he writes a check to the new insurer for the exact amount of the cash value.
C. Cody must transfer his interest in the policy directly to the policy beneficiary.
D. Cody must exchange the life insurance policy for an annuity in the same amount as the total cash value of the life insurance policy.

Sagot :

GinnyAnsweridn

Final answer:

To avoid paying income tax, Cody must exchange the policy for another life insurance policy while having the cash value transferred directly between insurers.


Explanation:

Cody must surrender the policy for another life insurance policy and have the cash value sent directly from the first insurer to the second insurer to avoid paying any income tax on the cash value amount.


Learn more about Life insurance policy surrender and taxation here:

https://brainly.com/question/38374984


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