Mark a Calendar Year Taxpayer, Purchased an Annuity for $50,000

question 70

Multiple Choice

Mark a calendar year taxpayer, purchased an annuity for $50,000 in 2016. The annuity was to pay him $3,000 on the first day of each year, beginning in 2016, for the remainder of his life. Mark's life expectancy at the time he purchased the annuity was 20 years. In 2018 Mark developed a deadly disease, and doctors estimated that he would live for no more than 24 months.

• A) If Mark dies in 2019, a loss can be claimed on his final return for his unrecovered cost of the annuity.
• B) If Mark dies in 2019, his returns for the two previous years can be amended to allocate the entire cost of the annuity to the years in which he received payments and reported gross income.
• C) If Mark is still alive at the end of 2018, he is not required to recognize any gross income because of his terminal illness.
• D) If Mark is still alive in 2038, his recovery of capital for that year is $500.
• E) None of these.

Identify and explain the different forms and implications of employee compensation besides salaries and wages.

Recognize the procedures and significance of recording obligations related to taxes and government regulations.

Understand the accounting and financial implications of loan interest and repayment structures.

Understand the definitions and basic concepts related to plant assets, including obsolescence and salvage value.

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Definitions:

Tariff

A tax imposed by a government on goods and services imported from other countries to protect domestic industries.

Sugar

A sweet-tasting, soluble carbohydrate found in many plants and used as a sweetener in food and beverages.

Price Elasticity

A gauge of the degree to which demand for a merchandise reacts to alterations in its price, showing how susceptible the amount demanded is to changes in price.

Specific Tax

Tax of a certain amount of money per unit sold.