Mae Li Is Beneficiary of a $70,000 Insurance Policy on Her

question 1509

Multiple Choice

Mae Li is beneficiary of a $70,000 insurance policy on her father's life. Upon his death, she elects to receive the proceeds in installments from the insurance company that carries the policy. She will receive $16,000 per year for five years. What are the tax consequences each year?

• A) $2,000 of the $16,000 payment is taxable each year.
• B) All $16,000 each year is taxable.
• C) $10,000 interest is taxable in the first year.
• D) There is no taxable income.

Understand the income and substitution effects of price changes on consumer choice.

Learn how the theory of consumer choice demonstrates key economic principles such as trade-offs.

Understand the relationship between consumer income and the consumption of normal and inferior goods.

Recognize the concept of a Giffen good and its implications for the law of demand.

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Definitions:

United Nations Framework Convention

An international treaty designed to address complex global issues through the establishment of a legally binding agreement among nations, such as the United Nations Framework Convention on Climate Change.

Climate Change

The long-term alteration of temperature and typical weather patterns in a place, largely driven by human activities such as burning fossil fuels.

Security Interest

A legal claim or lien on collateral that has been pledged, usually to secure repayment of a loan.

Contaminated Land

Areas of land polluted by hazardous substances which pose risks to health or the environment.