As a beneficiary, Kathryn receives $800 monthly from her deceased spouse's life insurance under a fixed-amount option. Each payment consists partly of principal (proceeds) and partly of interest. How is this income taxed?
A) The portion of each payment consisting of interest is taxed; the remainder is tax-free.
B) The portion of each payment consisting of principal is taxed; the remainder is tax-free.
C) Each payment is fully taxed.
D) Each payment is received fully tax-free.
Ans: A) The portion of each payment consisting of interest is taxed; the remainder is tax-free.
Business
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