Donald was killed in an accident while he was on the job. Darlene, Donald's wife, received several payments as a result of Donald's death. What is Darlene's gross income from the items listed below? a. Donald's employer paid Darlene an amount equal to Donald's three months' salary ($60,000), which is what the employer does for all widows and widowers of deceased employees.

b. Donald had $20,000 in accrued salary that was paid to Darlene.

c. Donald's employer had provided Donald with group term life insurance of $480,000 (twice his annual salary), which was payable to his widow in a lump sum. Premiums on this policy totaling $12,500 had been included in Donald's gross income under section 79.

d. Donald had purchased a life insurance policy (premiums totaled $250,000) that paid $600,000 in the event of accidental death. The proceeds were payable to Darlene, who elected to receive installment payments as an annuity of $30,000 each year for a 25-year period. She received her first installment this year.
Darlene's gross income from the receipts is $86,000.

a. Employer payments, not excluded as gift. The fact that the payment is part of company policy provides the earmarks of compensation rather than gift.

Amount received ...
Gross income ...

b. Accrued salary, earned before death.

amount received ...
gross income ...

c. Group term life insurance proceeds.

amount received ...
gross income ...

d. annuity proceeds ... amount received = $
less: recovery of capital ($600,000/$750,000*) x $30,000 ... amount received (24,000); gross income: 6,000

total gross income:

*investment in contract: nontaxable $600,000 insurance proceeds
** expected return: $30,000 x 25 years