Question

Wilson was killed in an accident while he was on the job. Mary, Wilson's wife, received several payments as a result of Wilson's death. Review the payments below and determine the amount that is Mary’s Gross Income from each of the items below. Explain each answer. If calculations are required, round to the closest dollar and show your work.
a. Wilson's employer paid Mary an amount equal to Wilson's three months' salary ($52,400), which is what the employer does for all widows and widowers of deceased employees.

b. Wilson had $12,200 in accrued salary that was paid to Mary.

c. Wilson's employer had provided Wilson with group term life insurance of $255,000, which was payable to his widow in a lump sum. Premiums on this policy totaling $21,000 had been included in Wilson's gross income under § 79.

d. Wilson had purchased a life insurance policy (premiums totaled $198,000) that paid $397,000 in the event of accidental death. The proceeds were payable to Mary, who elected to receive installment payments as an annuity of $25,000 each year for a 28-year period. She received her first installment this year.

Answer 1

a. Since the three months' salary is worth $52,400, the Gross Income from this item is $52,400.

b. Wilson's accrued salary will total $12,200 in Gross Income.

c. The gross income that Mary will receive is $255,000 under the group term life insurance.

d. The gross income that Mary will receive is $397,000, despite the election too receive an annuity of $25,000 for each of the 28-year period.

What is the gross income?

The gross income is the total amount of income earned or received over a period of time by an individual/household or a company. For individuals and households, the gross income includes wages, dividends, capital gains, business income, retirement distributions, and other incomes.

Gross income is stated before allowable deductions are made to arrive at the taxable or net income.

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