Which statement about federal income taxation of life insurance settlement payments is true?
A. Upon surrender of a whole life policy no part of the cash value is taxable because it is paid in a lump sum.
B. Choosing the "life income" settlement option saves the beneficiary from paying any income taxes.
C. The "interest only" option results in no taxation until the beneficiary selects one of the other options.
D. A lump sum settlement is paid out tax free when paid to a natural person.
Ans: D. A lump sum settlement is paid out tax free when paid to a natural person.
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