Claire, a widow, received the proceeds of a $150,000 life insurance policy on the life of her deceased husband. The policy was purchased by the husbands employer under a group policy and the employer had paid premiums of $60,000 on the policy. Claires husband had included $500 in gross income from the group term life insurance premiums during the years he worked for the employer.

Erin was diagnosed with a terminal illness. Her physician estimated that Erin would live no more than 18 months. After she received the doctors diagnosis, Erin cashed in her life insurance policy and used the proceeds to take a trip to see relatives and friends before she died. Erin had paid $12,000 in premiums on the policy, and she collected $48,000, the cash surrender value of the policy.

Sarah enjoys excellent health, but she cashed in his life insurance policy to purchase a new home. She had paid premiums of $12,000 and collected $50,000 from the insurance company.

1. Calculate the amount, if any, that Claire must include in income upon receipt of the $150,000 proceeds. Explain.
2. Calculate the amount, if any, that Erin must include in income upon receipt of the $48,000 cash surrender value. Explain.
3. Calculate the amount, if any, that Sarah must include in income upon receipt of the $50,000 cash surrender value. Explain.