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

question 310

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

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