Question
James purchased an annuity for $180,000 in 2015. The annuity is to pay him $2,500 per month for the rest of his life. His life
James purchased an annuity for $180,000 in 2015. The annuity is to pay him $2,500 per month for the rest of his life. His life expectancy is 100 months. Which of the following is correct?
| a. | Jamesis not required to recognize any income until he has collected72 payments (72$2,500 = $180,000). |
| b. | IfJames collects 20 payments and then dies in 2017, James estate should amend his tax returns for 2015 and 2016 and eliminate all of the reported income from the annuity for those years. |
| c. | For each $2,500 payment received in the first year,James must include $1,000 in gross income. |
| d. | For each $2,500 payment received in the first year,James must include $700 in gross income. |
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
