1. Allison dies during the current year. She is covered by a $1,000,000 life insurance policy payable to her husband, Bob. Bob elects to receive the policy proceeds in 10 an- nual installments of $120,000. Write a letter to Bob explaining the tax consequences of the receipt of each installment.
2. Earl is a student at Aggie Tech. He receives a $5,000 general scholarship for his outstanding grades in previous years. Earl is also a residence hall assistant, for which he receives a $1,000 tuition reduction and free room and board worth $6,000 per year. Earl's annual costs for tuition, books, and supplies are $8,000. Does Earl have any taxable income from the scholarship or the free room and board?