5. Wilson owned a term life insurance policy on his own life. After paying $18,300 in premiums, he sold the policy to Seabird Corp, a company qualified to purchase such policies, for $125,000. After purchasing the policy, Seabird paid premiums of $1,500 (total) during the time it owned the policy, and when Wilson died 18 months later, Seabird collected the face amount of the policy, $150,000. a. As a result of the sale of the policy, how much is Wilson required to include in his gross income? Upon collection, how much is Seabird required to include in its gross income? b. Would it make a difference if Wilson was terminally ill at the time he made the sale? 6. Beth sued an overzealous bill collector and received the following settlement: Repair of damage to her automobile that the collector attempted to repossess Physical damage to her arm caused by the collector Loss of Income while her arm was healing Punitive damages a. What effect does the settlement have on Beth's gross income? $3,300 15,000 6,000 80,000 b. Assume that Beth also collected $25,000 of damages for slander to her personal reputation caused by the bill collector misrepresenting the facts to Beth's employer and other creditors. Is this $25,000 included in Beth's gross income? Explain. 7. Olivia sued her former employer for a back injury she suffered on the job in 20x1. As a result of the injury, she was partially disabled. In 20x2, she received $240,000 in damage payments for her loss of future income, $160,000 in punitive damages because of the employer's flagrant disregard for the employee's safety, and $15,000 for medical expenses. The $15,000 of medical expenses were deducted on her 20x1 return when incurred. Olivia's 20x2 gross income from the above is: