Thomas purchased an annuity for $20,000 that will pay him $500 per month for ten years. What amount should Thomas include in his income each year?

Question

Quizplus · Accepted Answer

The total amount Thomas will receive over ten years is $500 x 12 months x 10 years = $60,000. The taxable portion is the total received minus the initial investment: $60,000 - $20,000 = $40,000. Spread over ten years, this is $4,000 per year.

Thomas Purchased an Annuity for $20,000 That Will Pay Him