To Calculate the Taxable Portion of an Annuity Payment,a Taxpayer

question 45

Multiple Choice

To calculate the taxable portion of an annuity payment,a taxpayer must determine all of the following except:

• A)The cost of the annuity contract.
• B)The expected return from the contract.
• C)The amount and frequency of occurrence of the stream of annuity payments.
• D)The year in which annuity payments were first received.

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Definitions:

Life Insurance Proceeds

The money paid out by a life insurance company to the beneficiary upon the insured's death.

Taxable

Describes income, goods, or transactions subject to taxation, according to government laws and regulations.

Transactions

Transactions are actions carried out between two or more parties that involve the exchange of goods, services, or financial assets.

Original Issue Discount

Refers to the discount from the par value at which a bond or other debt instrument is issued, resulting in a difference that is treated as tax-exempt or taxable interest over the life of the bond.