Income generated from an investment activity is primarily attributable to invested capital rather than the owner's personal involvement in the activity.
Mr.Adams paid $53,500 in premiums on a whole life insurance policy.When he canceled the policy,he received its cash surrender value of $61,600.He must recognize $61,600 income as a result of the cancellation.
An owner of a life insurance policy that includes an investment element must recognize income equal to the annual increase in the policy's cash surrender value.
If an investor sells some of the securities in a block but can't identify which ones were sold,she is presumed to have sold the securities with the latest acquisition date.
Two years ago,James loaned $60,000 to his friend.The debt is now uncollectible.If the loan created a bona fide debt,James recognizes a short-term capital loss.