Good comments.  I am not positive that these payments represent third party sick pay.   I am extrapolating from the fact that the wife, who was disabled (as was husband) received a W-2 form from the same life insurance company reporting wages as third party sick pay on that W-2 of more than $19,370.

Wife also died in middle of year.   I did some googling of other things about 1099 MISC and other income, and I am now thinking that the these payments represents possibly other forms of accrued sick pay/vacation days, and/or wages of some sort owed to the wife, after she died.   But then also paid to husband.  

Wife's 1099 MISC is for about $1300, and husband's 1099 MISC is for about $17,000.   I am inclined to agree with your thinking that is simply other income that is taxable at the federal leve.  And possibly when the polka's stop, the other person you reference will weigh in.  Thanks for your help IronMan.