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Question

Iris, a widow, elected to receive the proceeds of a $$100,000$ face value life insurance policy on the life of her deceased husband in annual installments of $$12,500$ over the remainder of her life, estimated to be $10$ years. Which of the following is true?

A$.$None of the payments received are included in gross income because their source is the life insurance policy.

B$.$All of the payments are included in Iris$$s gross income because she paid nothing for the right to receive the payments.

C$.$Iris will not recognize income until the $9$th year, after she has recovered her investment.

D$.$Iris must include $$2,500$ in gross income each year for the first $10$ years she collects on the policy.