Which of the Following Is Correct Regarding the Federal Income

question 34

Multiple Choice

Which of the following is correct regarding the federal income taxation of annuities that are purchased with after tax dollars?

• A)tax must be paid annually on the investment income that accrues during the accumulation period
• B)if funds are withdrawn during the accumulation period, they are taxed as ordinary income
• C)payments received during the liquidation phase are partially exempt from taxation
• D)there is no tax since each payment is considered compensation for a loss (ie., retirement)

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