Sumedha is the beneficiary of her mother's $500,000 life insurance policy.She receives $54,000 per year over ten years in settlement of her mother's policy.Sumedha will exclude the $54,000 proceeds received each year from the life insurance company.

Question

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Life insurance proceeds are generally tax-free, but if received in installments, the interest portion of each installment is taxable. Sumedha must include the interest portion in her taxable income.

Sumedha Is the Beneficiary of Her Mother's $500,000 Life Insurance