In May of Year 1, Leo purchased an annuity contract for $108,000. The annuity was to pay Leo $9,000 on June 30 th each year for the remainder of his life, beginning June 30 th of Year 1. Leo was 65 years old on June 30 th of Year 1. Leo died on August 1st of Year 13.

1. What are the tax consequences of the annuity payment received by Leo on June 30 th of Year 1?

2. What are the tax consequences of the annuity payment received by Leo on June 30 th of Year 2?

3. What are the tax consequences of the annuity on Leos final tax return ( , which will be filed after his death)?

4. What would have been the tax consequences in Year 22 if Leo was still alive and received an annuity payment on June 30 th of Year 22?