Mel was the beneficiary of a $45,000 group term life insurance policy on his deceased wife. His wife’s employer had paid all of the premiums on the policy. Mel used the life insurance proceeds to purchase a U.S. government bond, which paid him $2,500 interest during the current year. Mel’s Federal gross income from this is $2,500.
Answer the following statement true (T) or false (F)
True
Rationale: The $2,500 interest on the U.S. government bond must be included in gross income. The life insurance proceeds of $45,000 are excluded from gross income.
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What will be an ideal response?