Seth,a Calendar Year Taxpayer,purchased an Annuity for $20,000 in 2008

question 107

Multiple Choice

Seth,a calendar year taxpayer,purchased an annuity for $20,000 in 2008.The annuity was to pay him $2,000 on the first day of each year,beginning in 2008,for the remainder of his life.Seth's life expectancy at the time he purchased the annuity was 15 years.In 2010,Seth developed a deadly disease,and doctors estimated that he would live for no more than 24 months.

• A)If Seth dies in 2011,a loss can be claimed on his final return for his unrecovered cost of the annuity.
• B)If Seth dies in 2011,his returns for the two previous years can be amended to allocate the entire cost of the annuity to the years in which he received payments and reported gross income.
• C)If Seth is still alive at the end of 2010,he is not required to recognize any gross income because of his terminal illness.
• D)If Seth is still alive in 2025,his recovery of capital for that year is $1,333.
• E)None of the above.

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Definitions:

Canalized Characteristic

A trait that is genetically determined and less influenced by environmental factors, showing little variation among individuals.

Environmental Variations

Differences in environmental conditions that can affect organisms and lead to differing characteristics among them.

Family Study

A study that compares members of the same family to determine how similar they are on a given trait.

Cousins

Relatives who share a common ancestor other than a parent; typically, the children of one's aunt or uncle.