In 2011,Todd Purchased an Annuity for $200,000

question 57

Multiple Choice

In 2011,Todd purchased an annuity for $200,000.The annuity is to pay him $2,500 per month for the rest of his life.His life expectancy is 100 months.Which of the following is correct?

• A) Todd is not required to recognize any income until he has collected 80 payments (80 ´ $2,500 = $200,000).
• B) If Todd collects 30 payments and then dies in 2013, Todd's estate should amend his tax returns for 2011 and 2012 and eliminate all of the reported income from the annuity for those years.
• C) For each $2,500 payment received in the first year, Todd must include $2,000 in gross income.
• D) For each $2,500 payment received in the first year, Todd must include $500 in gross income.
• E) None of the above.

---

Definitions:

GABA

Gamma-aminobutyric acid, a neurotransmitter in the brain that inhibits or reduces nerve cell activity.

Seizures

Sudden, uncontrolled electrical disturbances in the brain that can cause changes in behavior, movements, feelings, and levels of consciousness.

Parkinson's Disease

A progressive neurological disorder marked by tremors, muscular rigidity, and slow, imprecise movement, mainly affecting middle-aged and elderly people.

Undersupply

A situation where the availability of a particular resource is insufficient to meet the demand for it, leading to shortages.