Fran dies on January 14, 2018. Her spouse, Carl, is the beneficiary of a $100,000 life insurance policy. Carl elects to receive the proceeds in 10 equal installments of $11,000. In 2018, Carl receives $11,000. The amount included in Carl's 2018 gross income is

Question

Quizplus · Accepted Answer

The amount included in Carl's 2018 gross income is $1,000. This is because the total proceeds of $100,000 are to be received in 10 equal installments of $11,000, which means there is an extra $1,000 per installment due to interest or earnings on the principal. The principal portion of the life insurance proceeds is not taxable, but the interest portion ($1,000 in this case) is taxable.

Fran Dies on January 14, 2018