Tom and Jean Are Husband and Wife and Live in California

Tom and Jean are husband and wife and live in California. In 1991, they use $400,000 of community funds to purchase an annuity from an insurance company. Under the terms of the contract, Tom is to receive $40,000 per year for life once he reaches age 65. If Jean outlives Tom, she is to receive $30,000 per year for life. Tom dies first in 2011 (and before reaching age 65) . At this time, the value of Jean's interest is $500,000. As to this contract, Tom's gross estate includes:

A) $0.
B) $200,000.
C) $250,000.
D) $500,000.
E) None of the above.