Which of the following is correct regarding the federal income taxation of annuities that are purchased with after tax dollars?
A)tax must be paid annually on the investment income that accrues during the accumulation period
B)if funds are withdrawn during the accumulation period, they are taxed as ordinary income
C)payments received during the liquidation phase are partially exempt from taxation
D)there is no tax since each payment is considered compensation for a loss (ie., retirement)

Question

Quizplus · Accepted Answer

Payments received during the liquidation phase are partially exempt from taxation because the investment income that accrued during the accumulation period was already taxed.

Which of the Following Is Correct Regarding the Federal Income