Whole life policy being transferred to me – tax implications for surrendering/closing?

Hello!

When I was a child my grandmother started a whole life policy on me for about $300k. My mother was the owner and beneficiary of the policy. My mother is now seeking to transfer ownership and beneficiary status to me.

The policy has a current remaining cash value of about $28k, but it has a roughly $40k loan against it. The premium is over $3k/year with loan repayment.

I am well insured via term policies and am not concerned about keeping the policy. I am interested in surrendering it/closing it and taking the cash. However, I am concerned about the tax implications.

Are there any tax implications in this policy being transferred to me?

If I close and cash the policy, I know I will have to pay taxes on any gains the basis made throughout the years, but my larger concern is whether I will be required to pay taxes on the basis, as I didn’t pay into the account and therefore the basis money wasn’t my money could be seen as a taxable event?

In the end I don’t want to end up owing the entire surrender value (or more) in taxes. I’d rather refuse the transfer at that point.