Lucinda, a welder for Big Auto, Inc., dies in an automobile accident on March 14 of this year. Big Auto has a company policy of paying $5,000 to the spouse of any employee who dies. In addition to the $5,000 payment, Big Auto pays Harvey, Lucinda's husband, $1,600 in salary and $1,100 in vacation pay Lucinda had earned before her death. Harvey also collects $120,000 from a group term life insurance policy Big Auto provided as part of Lucinda's compensation package. Lucinda had contributed to a qualified employer-sponsored pension plan. Big Auto had matched Lucinda's contri- butions to the plan. The plan lets the beneficiary of an employee who dies before pay- ments begin take the plan balance as an annuity or in a lump sum. Harvey elects to take the $250,000 plan balance in a lump sum. Write a letter to Harvey explaining the tax consequences of each payment he receives.