Question

Please answer the following questions including authority and reasoning.

1. (a). Sam was shot and killed during a robbery at his bar. His wife, Diane, was the beneficiary of his $200,000 whole life insurance policy. Diane collected the $200,000 face value of the policy from the insurance company. Does she realize gross income from this transaction?

(b). Instead, suppose Diane exercises an option in the policy to receive interest payments on the $200,000 for the remainder of her life (an amount estimated to be $10,000 annually), with the principal of the policy to be paid to her daughter upon Diane’s death. Must the daughter include the $200,000 principal in her income?

(c). What if Diane elects to receive an annuity of $14,000 a year? Assume her life expectancy is 20 years and there is no refund if Diane dies before receiving full payment.

Answer 1

Answer = (9) Sam was shot and killed during a robbery at his bar, his wife, Digne, was the beneficiary qolis $_200006., whole life insurance policy as in the given Case. it is assume that the Diane is a legal de presentative for sq.m_so: the ho sum of a $200000 face vale she Mealize gross income from this transaction but it's not a income it's called insurance Amount Domk_is_Exempt from. income taxe if. Amont q intrest_$10000 Perantium. Meceived by Diane and with the principal of the policy to be paid to her doughter. upen Dianés death, yes then $20000 Principal in her income con in 384 ophan my view is that he should opt. This s option bicos curuaty will be received Amt. $14000 a year, the Amt ja 20 year is (14000 x 20 = 280000) it is more than Deynciple Amuk. altro also the insurane Amt deceived by her legal defuentatine is Exempt from income tax So first Consider as a income than deduct it.