Albert Had a Terminal Illness That Would Require Almost Constant

Albert had a terminal illness that would require almost constant nursing care for the remaining two years of his estimated life, according to his doctor.Albert had a life insurance policy with a face amount of $100,000.He had paid $25,000 of premiums on the policy.The insurance company has offered to pay him $80,000 to cancel the policy, although its cash surrender value was only $55,000.He accepted the $80,000.Albert used $15,000 to pay his medical expenses.Albert made a miraculous recovery and lived another 20 years.As a result of cashing in the policy:

A) Albert must recognize $55,000 of gross income, but he has $15,000 of deductible medical expenses.
B) Albert must recognize $65,000 ($80,000 - $15,000) of gross income.
C) Albert must recognize $40,000 ($80,000 - $25,000 - $15,000) of gross income.
D) Albert is not required to recognize any gross income because of his terminal illness.
E) None of these.