Terri runs a sole proprietorship business that employs three people. About 40% of the business profit is generated by Lloyd, her sales manager. To protect her business against income loss should Lloyd suffer a long-term disability, Terri has taken out key person disability insurance on Lloyd's life, providing sufficient benefits to offset the lost profits for one year. Terri owns the policy, pays the premiums and is the beneficiary for any benefits that might be paid. What is the tax status of premiums paid and benefits received under the policy? Question 24 options: 

A) The benefits are tax-deductible by Terri and the benefits are tax-free. 

B) The premiums are not tax-deductible by Terri but the benefits would be taxable to Lloyd. 

C) The premiums are tax-deductible by Terri, but the benefits would be taxable to her. 

D) The premiums are not tax-deductible by Terri and benefits would not be taxable to Terri