Annuity Question

  • Creator
    Topic
  • #3046653
    Imi
    Participant

    On October 1, 2017, Cruz purchased an annuity for $90,000 in post-tax dollars, effective immediately, that pays Cruz $500 a month until death. At the date of purchase, Cruz’s official life expectancy was 25 years. How much of Cruz’s 2017 annuity payments should be included in cruz’s gross income for 2017?

    Answer: $600

    Can someone please explain how they got 600? My answer is coming as $200

    Base amount: $90,000
    Expected Return: $150,000
    90,000/150,000 = 60%
    500 * 60% = 300 Not taxable
    500 * 40% = 200 taxable and should be included in gross income

    Am I doing this right? I am so confused.

Viewing 3 replies - 1 through 3 (of 3 total)
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  • #3046659
    monikernc
    Participant

    He received 3 payments in 2017. 3x$200=$600

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    #3046662
    Imi
    Participant

    That was so simple. I should have read the question carefully lol. Thank you Moni.

    #3047655
    monikernc
    Participant

    That’s ok. One reason you study is to learn to read the questions. It is the most important skill to have during the exam. Plus you are probably psyching yourself out or telling yourself it’s too hard. Positive self-talk is key. You can do this!

    AUD - 93
    BEC - 82
    FAR - 76
    REG - 88
    How have you been?
    Ninja book and MCQs and the forum, all first try! 2016
    Licensed State of Montana April Fool’s Day 2020
    State of Colorado June 2020 - AICPA Ethics 93
    Experience was the worst part of the journey for me. You?
    If you want things to change you have to do something different.

    FAR 7/25/15 76!
    AUD 10/30/15 93
    BEC 2/27/16 82
    REG 5/23/16 88!
    Ninja Book and MCQ and the forum - all the way!!!
    and a little thing i like to call, time and effort!
    if you want things to change, you have to do something different

Viewing 3 replies - 1 through 3 (of 3 total)
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