Carin, a Widow, Elected to Receive the Proceeds of a $150,000

question 24

Multiple Choice

Carin, a widow, elected to receive the proceeds of a $150,000 life insurance policy on the life of her deceased husband in 10 installments of $17,500 each.Her husband had paid premiums of $60,000 on the policy.In the first year, Carin collected $17,500 from the insurance company.She must include in gross income:

• A)$0.
• B)$2,500.
• C)$10,000.
• D)$25,000.
• E)None of these.

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Definitions:

Injunction

A legal order issued by a court that directs an individual or entity to do or refrain from doing a specific action.

Contractual Duty

An obligation imposed by a contract that requires a party to act or refrain from acting in a certain way.

Liquidated Damage

An amount of money, agreed upon by parties in a contract, to be paid as compensation by one party to the other in the event of a breach of contract.

Approximation

The process of finding a value that is close enough to the right answer, usually within an acceptable margin of error.