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Business, 05.05.2020 09:09 shayla3613

Swan Finance Company, an accrual method taxpayer, requires all of its customers to carry credit life insurance. If a customer dies, the company receives from the insurance company the balance due on the customer's loan. Ali, a customer, died owing Swan $1,500. The balance due included $200 accrued interest that Swan has included in income. When Swan collects $1,500 from the insurance company, Swan:.
a. Must recognize $1,500 income from the life insurance proceeds.
b. Must recognize $1,300 income from the life insurance proceeds.
c. Does not recognize income because life insurance proceeds are tax-exempt.
d. Does not recognize income from the life insurance because the entire amount is a recovery of capital.
e. None of these.

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