18.Valerie’s Uncle Bill won money in the lotto and gave Valerie a check for $25,000.Does this money count as taxable income to the McNamaras?

Whole Life Insurance Policy

Face Value: $100,000

Cash Value: $8,800

Owner: Stephen

Beneficiary: Valerie

Insured: Stephen

Policy Dividend: $300

The McNamaras itemized deductions for their federal return last year. Currently, neither Valerie nor Stephen has access to a qualified retirement plan through their work and they have not funded IRAs up to this point in time. They have access to a Section 125 flexible spending account through Valerie’s employer. To date, they have not funded the account. Open enrollment is coming up and lasts for the next 30 days. For purposes of solving this case, use the tax information shown below.

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