Marco needs just $8,000 more to accumulate the purchase price of a used classic sports car that he has always wanted. He can’t wait any longer. So he decides to borrow against the cash surrender value of his whole life insurance policy, by way of a policy loan. The plan has a cash surrender value of $18,000 and an adjusted cost basis (ACB) of $5,000. Marco is in a 40% marginal tax bracket.
How large of a policy loan would Marco need to take out in order to raise the $8,000, after-tax, that he needs?
Question 11 options:
A)
$13,300
B)
$8,000
C)
$10,000
D)
$8,750