Charles Bought an Annuity for $30,000 Several Years Ago

question 138

Multiple Choice

Charles bought an annuity for $30,000 several years ago. The annuity will pay him $250 per month from age 62 until he dies. During the current year, Charles turns 62 and receives his first annuity payment.
I.If Charles dies after receiving 192 monthly payments, he must amend prior returns and correct the income reported based on 192 monthly payments.
II.If Charles receives more than 260 payments, the total of each payment received after the 260^th payment is included from income.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Negotiable Instrument

A document guaranteeing the payment of a specific amount of money, either on demand or at a set time, and to a specific person or bearer.

Note

A written promise to pay a specified amount of money at a certain time, often used in finance as a type of informal loan agreement or debt instrument.

Nonnegotiable

indicates an item that cannot be transferred or assigned to another party through endorsement or delivery.

Purchase Price

The amount of money paid or to be paid by the buyer to acquire ownership of a good, service, or property.