Albert Had a Terminal Illness Which Required Almost Constant Nursing

Albert had a terminal illness which required almost constant nursing care for the remaining two years of his estimated life, according to his doctor.Albert had a life insurance policy with a face amount of $100,000.Albert had paid $10,000 of premiums on the policy.The insurance company has offered to pay him $75,000 to cancel the policy, although its cash surrender value was only $60,000.Albert accepted the $75,000.Albert used $5,000 to pay his medical expenses.Albert made a miraculous recovery and lived another 20 years.As a result of cashing in the policy:

A) Albert is not required to recognize any gross income because of his terminal illness.
B) Albert must recognize $65,000 ($75,000 - $10,000) of gross income.
C) Albert must recognize $10,000 ($75,000 - $60,000 - $5,000) of gross income.
D) Albert must recognize $75,000 of gross income, but he has $5,000 of deductible medical expenses.
E) None of the above.

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