Fran purchased an annuity that provides $12,000 quarterly payments for the next 10 years. The annuity was purchased at a cost of $300,000. How much of the first quarterly payment will Fran include in her gross income?

Question

Quizplus · Accepted Answer

The annuity exclusion ratio is [$300,000/(4 × 10)] = $7,500 return of capital per payment. Hence, $4,500 of each $12,000 payment is included in gross income.

Fran Purchased an Annuity That Provides $12,000 Quarterly Payments for the Next