Bart's Spouse, Carla, Dies During the Current Year

question 150

Multiple Choice

Bart's spouse, Carla, dies during the current year. Carla's life insurance policy names Bart the sole beneficiary of the $2 million proceeds. Bart invests the $2 million in a bank certificate of deposit (CD) . For the current year, Bart earns $98,000 interest from the CD. What are the tax effects of these events for Bart?
I.The $2 million is excluded from gross income.
II.Bart has no taxable income from these transactions.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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