Question

Ellie purchases an insurance policy on her life and names her brother, Jason, as the beneficiary. Ellie pays $41,000 in premiums for the policy during her life. When she dies, Jason collects the insurance proceeds of $615,000.

As a result, Jason reports gross income of:______.

Answer 1

Answer: $0

Step-by-step explanation:

Life insurance proceeds are generally considered to be tax exempt in order to ease the burden on the bereaved which means that Jason does not have to report any gross income from receiving this insurance proceeds.

If Jason does not collect all the proceeds at once however, and leaves some or all of it with the insurance company to accumulate interest, he will have to pay taxes on that interest.