A beneficiary has just received a claim payment for a life insurance policy. Which of the following is TRUE regarding the federal income tax liability owed?

A beneficiary has just received a claim payment for a life insurance policy. Which of the following is TRUE regarding the federal income tax liability owed? 



a) A flat tax of 10% is owed on all proceeds
b) Federal income tax is owed if proceeds exceed $250,000
c) No federal income tax is owed on life insurance proceeds
d) Tax liability owed depends on the type of life insurance policy


Answer: c) No federal income tax is owed on life insurance proceeds

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