Which of the Following Statements About Annuity Contracts Is True

question 56

Multiple Choice

Which of the following statements about annuity contracts is true?

• A) Annuity contracts provide a fixed income stream.
• B) Payments received from an annuity contract are tax-exempt.
• C) Payments received from an annuity contract are fully taxable as ordinary income.
• D) Payments received from an annuity contract are fully taxable as capital gain.

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Definitions:

Additional Paid-in Capital

The amount of money investors have paid for shares above their nominal value during the issuance of stock.

Voting Shares

Shares of a company that grant the shareholder the right to vote on company matters, such as electing the board of directors.

Fair Value

A projected cost at which property or obligation can be swapped among aware, agreeable individuals in a transaction without any undue pressure.

Stock Issuance Costs

Expenses associated with the issuance of new shares of stock, such as legal, accounting, and underwriting fees.