Allison dies during the current year. She is covered by a $1,000,000 life insurance policy payable to

Question:

Allison dies during the current year. She is covered by a $1,000,000 life insurance policy payable to her husband, Bob. Bob elects to receive the policy proceeds in 10 annual installments of $120,000. Write a letter to Bob explaining the tax consequences of the receipt of each installment.