Wilma purchased an annuity policy for $100,000 that will pay her $10,000 per year for life beginning on her 60th birthday in 5 years.At 60, her life expectancy is 25 years.How much of each annual payment can Wilma exclude from income?
A)0
B)$4,000
C)$6,000
D)$10,000

Question

Quizplus · Accepted Answer

Wilma can exclude $4,000 of each annual payment from income. This is calculated by dividing the cost of the annuity ($100,000) by her life expectancy (25 years), resulting in $4,000 per year that is considered a return of her investment and not taxable income.

Wilma Purchased an Annuity Policy for $100,000 That Will Pay