At the time of his death, Jason was a participant in Silver Corporation's qualified pension plan and group term life insurance. The balance of the survivorship feature in his pension plan is:
Contributions by Silver $800,000
After-tax contributions by Jason 400,000
Plan earnings 300,000
The term insurance has a maturity value of $100,000 . All amounts are paid to Pam, Jason's daughter. One result of these transactions is:
a. Pam must pay income tax on $300,000.
b. Pam must pay income tax on $1,100,000.
c. Jason's gross estate must include $1,200,000.
d. Jason's gross estate must include $1,500,000.
b
RATIONALE: Pam must pay income tax on $1,100,000 [$800,000 (employer's contributions) + $300,000 (plan earnings)]. The insurance proceeds ($100,000) are not subject to income tax. Jason's gross estate includes $1,600,000 ($800,000 + $400,000 + $300,000 + $100,000).
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