David has been diagnosed with cancer and is expected to live less than 18 months.David is covered by a life insurance policy with a $400,000 face amount.David cashes in the policy early under a special option and receives 80% of the face amount or $320,000.In the year of collection,David will report
A)no income.
B)$80,000.
C)$320,000.
D)$400,000.

Question

Quizplus · Accepted Answer

The amount received under a life insurance policy due to terminal illness is generally not taxable, so David will report no income.

David Has Been Diagnosed with Cancer and Is Expected to Live