Sam died on January 15, 2004 and left his wife, Terry, an insurance policy with a face value of $100,000. Terry elected to receive the proceeds over a 10-year period ($10,000 plus interest each year). This year Terry receives $11,500 ($10,000 proceeds plus $1,500 interest) from the insurance company. How much income must Terry report from this payment?

Question

Quizplus · Accepted Answer

Terry must report the interest portion of the payment as income. In this case, the interest is $1,500, so that is the amount she must report. The $10,000 in proceeds is not taxable income.

Sam Died on January 15, 2004 and Left His Wife