Sanjay purchased a single life annuity contract for $200,000. The contract will pay $15,000 per year beginning

Question:

Sanjay purchased a single life annuity contract for $200,000. The contract will pay $15,000 per year beginning in 2017 for the remainder of his life and has an expected return of $330,000. What amount of taxable income must Sanjay report in 2017?

a. $5,909.

b. $9,091.

c. $15,000.

d. $130,000.

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...

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