Phyllis surrenders her annuity while it is in the accumulation phase. She paid $$8,000$ into the contract, and it has a value of $$11,000.$ How will her $$3,000$ gain be taxed?

A$)$ As ordinary income, spread out over the years until she reaches age $65$

B$)$ No tax due on the gain

C$)$ As ordinary income in the year of surrender

D$)$ $$1,500$ as ordinary income and $$1,500$ as capital gain