Alice has a life insurance policy with a cash surrender value of $200,000 on which she has paid $30,000 in premiums. She has decided to cash in the policy. Discuss the tax consequences if Alice is terminally ill and decides to use the proceeds to take a cruise around the world.

a) She can exclude all of the gain in the policy ($200,000 less $30,000 of premiums paid) from gross income

b) She must include all of the gain ($170,000) in gross income

c) She must include all $200,000 received in gross income

d) She must include $30,000 in gross income