Betty Purchased an Annuity for $24,000 in 2012

question 107

Multiple Choice

Betty purchased an annuity for $24,000 in 2012.Under the contract, Betty will receive $300 each month for the rest of her life.According to the actuarial estimates, Betty will live to receive 96 payments and will receive a 3% return on her original investment.

• A)If Betty collects $3,000 in 2012, her gross income is $630 (.03 ´ $21,000).
• B)Betty has no gross income until she has collected $24,000.
• C)If Betty lives to collect more than 96 payments, all of the amounts collected after the 96th payment must be included in taxable income.
• D)If Betty lives to collect only 60 payments before her death, she will report a $6,000 loss from the annuity [$24,000 - (60 ´ $300) = $6,000] on her final return.
• E)None of the above.

---

Definitions:

Shaping

A method in behavioral psychology used to gradually train a new behavior by reinforcing successive approximations to the desired behavior.

Premack Principle

A principle in psychology that states that more probable behaviors will reinforce less probable behaviors.

Negative Reinforcement

The removal of a stimulus to increase the probability that a behavior will be repeated.

Positive Punishment

The addition of a stimulus to decrease the probability that a behavior will recur.