Leroy Purchased an Annuity from an Insurance Company for $42,000

question 81

Multiple Choice

Leroy purchased an annuity from an insurance company for $42,000. He has been receiving $940 monthly from the annuity. Leroy began receiving the payments when he was 72 years old and he has now received annuity payments for 13.33 years. How much of each subsequent $940 payment must Leroy include in his gross income?
I.The Capital Recovery Concept explains the result.
II.Leroy may exclude 100% of the annuity payments received.
III.Leroy must recognize 100% of the annuity payments received.
IV.Leroy will continue to recognize the same amount that he recognized in all prior years.
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• A)Only statement I is correct.
• B)Only statement III is correct.
• C)Only statement IV is correct.
• D)Only statements I and III are correct.
• E)Only statements I and IV are correct.

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Definitions:

Bribery

The act of offering, giving, receiving, or soliciting something of value to influence the action of an official or other person in a position of authority.

Union Funds

Monetary resources collected and managed by a union through dues and other means to support its activities, operations, and member services.

Violence

Behavior involving physical force intended to hurt, damage, or kill someone or something.

Fair Labor Standards Act

U.S. legislation that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards in the private sector and federal, state, and local governments.