Problem
Leslie was the insured under a term life insurance policy with death benefits of $250,000. She passed during the effective term of the policy. Benefits are awarded and payable over 10 years to a beneficiary. In the first year after death, the beneficiary receives $28,000. What are the tax consequences of this payment to the beneficiary?
• The payment is entirely taxable under § 61.
• The payment is excluded from income under § 101.
• $3,000 of the payment is taxable.