Is income from life insurance and endowment contracts included in gross income?

Income from life insurance and endowment contracts is generally excluded from gross income under the Internal Revenue Code. This means that the proceeds from life insurance policies, when received by the beneficiary upon the death of the insured, are not subject to income tax. Additionally, if an individual receives the proceeds from an endowment contract, it is also typically tax-exempt if it was received as a lump sum at maturity.

The reasoning behind this tax treatment is that these payments are intended as financial support for beneficiaries or to fulfill a contractual obligation rather than as income. Therefore, the correct answer indicates that such income would not be included in gross income for tax purposes. This supports the intent of providing a tax-free benefit to individuals receiving these payments during a time when they may be experiencing loss or financial hardship due to the death of a loved one or the maturation of an investment policy.