Question #$9$ of $50$

Question ID: $1184169$

At the age of $58,$ Cindi purchased a nonqualified fixed deferred annuity with a $$25,000$ premium. Seven years later after the surrender period ends, Cindi withdraws $$3,000$ from the annuity now valued at $$33,000.$ What is the tax implication of this withdrawal?

A$)$ The withdrawal is tax free.

B$)$ Cindi will be taxed on the full $$3,000$ as ordinary income, and a penalty tax will be assessed.

C$)$ Cindi will be taxed on the full $$3,000$ as ordinary income, but no penalty tax will be assessed.

D$)$ Cindi will be taxed on the full $$3,000$ as capital gains, but no penalty tax will be assessed.