Sumedha is the beneficiary of her mother's $500,000 life insurance policy. She receives $54,000 per year over ten years in settlement of her mother's policy. Sumedha will exclude the $54,000 proceeds received each year from the life insurance company. A. True B. False

Question

Linda Frederick

Business

24 February, 17:27

Sumedha is the beneficiary of her mother's $500,000 life insurance policy. She receives $54,000 per year over ten years in settlement of her mother's policy. Sumedha will exclude the $54,000 proceeds received each year from the life insurance company. A. True B. False

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Answers (2)

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Laurel · Answer 1

B) false

Explanation:

Life insurance proceeds received by a beneficiary are not taxed and should not be included as gross income. But that only refers to the principal amount received, it doesn't include any interests.

In this case, since Sumedha is the beneficiary of a $500,000 policy that is going to be paid in 10 yearly installments, she can exclude $50,000 per year, but the interests ($4,000) must be included in her gross income.

Tara Hardin · Answer 2

Answer: B: False

The mother ensured she got 10% of the total insurance policy yearly, doing the math, $54, 000 * 10 which equals $540, 000. That is why she can not exclude the $54, 000 yearly payment.