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

question 105

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