Carin, a widow, elected to receive the proceeds of a $150,000 life insurance policy on the life of her deceased husband in 10 installments of $17,500 each.Her husband had paid premiums of $60,000 on the policy. In the first year, Carin collected $17,500 from the insurance company.She must include in gross income:

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The total amount received ($175,000) exceeds the policy amount ($150,000) by $25,000. This excess is considered interest and is taxable. The interest portion per installment is $2,500 ($25,000/10 installments).

Carin, a Widow, Elected to Receive the Proceeds of a $150,000