My policy is over 50 years old, original value $1000 but now has a cash value of $6500 (paid up insurance of $8500). Each year I received dividends on the policy that were used to purchase additional insurance. These dividends were always included in my income. Is the cost basis of my insurance policy not only the premiums I paid for the $1000 policy but also all of the dividends I included in my taxable income over the years? Wouldn't this render my cash out as zero?
