Betty Purchased an Annuity for $24,000 in 2017

question 83

Multiple Choice

Betty purchased an annuity for $24,000 in 2017. 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 2017, 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 these.

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