Marbella is the beneficiary of a $700,000 insurance policy on her husband's life.Marbella elects to receive $150,000 per year for 5 years rather than receive the entire $700,000 in a lump sum.How much is included in income in the first year.

Question

Quizplus · Accepted Answer

The total amount received over 5 years is $750,000 ($150,000 x 5). The excess over the policy amount ($750,000 - $700,000 = $50,000) is interest, which is taxable. The interest portion for the first year is $10,000 ($50,000/5 years).

Marbella Is the Beneficiary of a $700,000 Insurance Policy on Her