Wiley CPA Review QOTD – REG

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The following is from the Wiley CPA 2011 Test Bank Software (Online). Click here to get over 1,100 REG CPA Exam practice questions for $87.

Topic: Individual Taxation

Seymour Thomas named his wife, Penelope, the beneficiary of a $100,000 (face amount) insurance policy on his life. The policy provided that upon his death, the proceeds would be paid to Penelope with interest over her present life expectancy, which was calculated at 25 years. Seymour died during 2010 and Penelope received a payment of $5,200 from the insurance company. What amount should she include in her gross income for 2010?

A: $ 200
B: $1,200
C: $4,200
D: $5,200

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Leave a Reply

3 comments

nicole 10 years ago

$1200, answer B

Nupur 10 years ago

B (100,000/25 = 4,000. So out of proceeds of 5,200, $4,000 is life insurance proceed on face amount of policy, which is non taxable, and 1,200 is interest which ll be taxed).

jitendra patel 10 years ago

100000/25 yrs = 4000 $ 5200$ - 4000 $ = 1200 $ as a taxation.