Britney Is Beneficiary of a $150,000 Insurance Policy on Her

question 35

Multiple Choice

Britney is beneficiary of a $150,000 insurance policy on her father's life.Upon his death,she may elect to receive the proceeds in five yearly installments of $32,000 or may take the $150,000 lump sum.She elects to take the lump sum payment.What are the tax consequences in year one?

• A)All $32,000 each year is taxable.
• B)$10,000 interest is taxable in the first year.
• C)There is no taxable income.
• D)The lump sum payment is taxable.

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Definitions:

FASB Technical Bulletins

Short for Financial Accounting Standards Board Technical Bulletins, these documents provide guidance on specific accounting issues.

Authoritative Support

Documentation or guidance that provides the basis for accounting policies and decisions, often issued by standard-setting bodies.

Technical Bulletins

Official communications issued to provide instructions, information, or updates on technical aspects of products or services.

FASB

The Financial Accounting Standards Board, an organization that establishes financial accounting and reporting standards within the United States.