Life insurance proceeds because of the death of the insured are fully excludable from the gross income of the recipient if the payment is made:

Question

Quizplus · Accepted Answer

Life insurance proceeds paid as a lump sum to the recipient are fully excludable from the gross income of the recipient. Payments made over time may be subject to tax on the interest earned on the proceeds. Choice A is incorrect because the method of payment can affect the tax implications. Choice B is incorrect because payments made over time may not be fully excludable from the recipient's gross income. Choice D is incorrect because although the method of payment and timing can both affect the tax implications, payments made over time may not be fully excludable from the recipient's gross income.

Life Insurance Proceeds Because of the Death of the Insured