What Happens If The Coverage Is Surrendered?
The carrier pays the bank the cash value of the policies. The bank must pay income tax on any gain, which is determined by the amount of premium(s) paid. For example, if the cash value is $60M and the amount of premium paid is $50M, the bank would recognize $10M of taxable income. This would be taxed at normal rates and subject to an additional 10% penalty.
