Which of the following statements is (are)true regarding the taxation of distributions from individual annuities?
I.Individual annuity distributions are never taxable.
II.Once the annuitant has recovered the premiums he or she paid for the annuity,the entire annuity distribution is taxable.

Question

Quizplus · Accepted Answer

Statement I is false. Distributions from individual annuities are generally taxable, with certain exceptions such as when they are part of a qualified retirement plan or when they represent a return of the principal paid into the annuity.

Statement II is true. When the annuitant has recovered the amount of premiums paid into the annuity, any subsequent distributions are considered earnings and are fully taxable as ordinary income.

Which of the Following Statements Is (Are)true Regarding the Taxation