Iris Collected $150,000 on Her Deceased Husband's Life Insurance Policy

Iris collected $150,000 on her deceased husband's life insurance policy.The policy was purchased by the husband's employer under a group policy.Iris's husband had included $5,000 in gross income from the group term life insurance premiums during the years he worked for the employer.She elected to collect the policy in 10 equal annual payments of $18,000 each.

A) None of the payments must be included in Iris's gross income.
B) The amount she receives in the first year is a nontaxable return of capital.
C) For each $18,000 payment that Iris receives, she can exclude $500 ($5,000/$180,000 × $18,000) from gross income.
D) For each $18,000 payment that Iris receives, she can exclude $15,000 ($150,000/$180,000 × $18,000) from gross income.
E) None of these.

Correct Answer:

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