Twenty years ago, Mrs. Cole purchased an insurance policy on her own life. Mrs. Cole died this year, and the policy paid the $300,000 death benefit to her son Jeffrey. During her life, Mrs. Cole paid total premiums of $71,200 on the policy. Which of the following statements is true?

Question

Quizplus · Accepted Answer

The death benefit paid to Jeffrey is generally not taxable as income because it is a life insurance payout. Additionally, since Mrs. Cole paid $71,200 in premiums during her life, the payout is considered a return of premium and is therefore excluded from Jeffrey's gross income. Therefore, Jeffrey can exclude the $300,000 payment from gross income.

Twenty Years Ago, Mrs