George purchased a life annuity for $3,200 that will provide him $80 monthly payments for as long as he lives. Based on IRS tables, George's life expectancy is 100 months. How much of the first $80 payment will George include in his gross income?

Question

Quizplus · Accepted Answer

The annuity exclusion ratio is ($3,200/100) = $32 return of capital per payment. Hence, $48 of the $80 is included in gross income.

George Purchased a Life Annuity for $3,200 That Will Provide