Ram Corp.’s operating income for the year ended December
31, 2012, amounted to $100,000. Included in Ram’s 2012
operating expenses is a $6,000 insurance premium on a policy
insuring the life of Ram’s president. Ram is beneficiary of this
policy. In Ram’s 2012 tax return, what amount should be deducted
for the $6,000 life insurance premium?

(d) The requirement is to determine the amount of life
insurance premium that can be deducted in Ram Corp.’s income
tax return. Generally, no deduction is allowed for expenditures
that produce tax-exempt income. Here, no deduction is allowed
for the $6,000 life insurance premium because Ram is the beneficiary
of the policy, and the proceeds of the policy will be excluded
from Ram’s income when the officer dies.