Question
Patricia is a participant in a qualified pension plan. She retires on January 1, 2016, at age68, and receives pension payments beginning in January 2016.
Patricia is a participant in a qualified pension plan. She retires on January 1, 2016, at age68, and receives pension payments beginning in January 2016. Her pension payments, which will be received monthly for life, amount to $1,680 per month. Patricia contributed $50,400 to the pension plan on a pre-tax (or tax-deferred) basis, and the number of anticipated payments based on Patricia's age of 68 years is 210 months(see IRS table) from the date she starts receiving payments
Age of Primary Annuitant | Number of |
on the Start Date | Anticipated Payments |
55 and under | 360 |
56-60 | 310 |
61-65 | 260 |
66-70 | 210 |
71 and over | 160 |
a. | What gross income will Patricia recognize in 2016 and each year thereafter?
|
b. | How would your answer to Part a change if Patricia made contributions to the plan on an after-tax basis?
|
c. | If, in Part b, Patricia dies in December 2017 after receiving pension payments for two full years, what tax consequences occur in the year of death?
|
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