Under the Simplified Method for Calculating the Taxable Amount for an Annuity

question 5

Multiple Choice

Under the Simplified Method for calculating the taxable amount for an annuity:

• A)The amount paid for the annuity by the employee is recovered first.
• B)The amount paid by the employee for the annuity is divided by a number based on the length of employment.
• C)The amount paid in by the employee to the plan is divided by a number based on the age of the employee (or the employee and spouse)at the starting date of the annuity.
• D)The investment in the annuity is divided by a number based on the age of the older annuitant at the starting date of the annuity when there is more than one annuitant (a joint and survivor annuity).
• E)There are separate tables for "well" employees and "sick" employees.

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Definitions:

Sole Proprietorship

A business in which one person (sole proprietor) controls the management and profits.

Entity Partnership

A business structure where two or more entities join together in partnership to conduct business.

Limited Liability Company

A corporate framework that merges the tax benefits of a sole proprietorship or partnership with the protective limited liability found in a corporation.

Sole Proprietor

The single person at the head of a sole proprietorship.