Life Ins company pays out on a medical policy

[cathe]

My client came with a check stub for $15,000 that a Life Ins company paid out because her husband had invasive cancer. She picked up the "extra" policy from work for a few dollars a month that covered up to the $15,000 in case of catastrophic medical. He was not diagnosed until after the policy was purchased.
The company did not send them any IRS form, just an accounting page. I do not think this is taxable. Wouldn't know how to put it on the return if I thought it was, except as other income. Their bill was over $60,000 from the hospital, I don't know what they paid out of pocket. Don't know if it matters.

Anyone think I should be showing it on the return? Client thinks the IRS sees all transactions over $10,000 and expects them to show on a return, no matter where it comes from.

Am I just getting punchy?

Cathe

[Burke]

Just sounds like a medical reimbursement to me. If you are deducting medical expenses on Sche A, this would figure in as a reimbursement. Some life insurance policies pay out advance death benefits too, for terminal illness situations where the insured is not expected to live more than 6 mos. In either case, it would not be taxable.