Assume an exclusion ratio of 75 percent and a marginal tax rate of 34 percent. The total amount of income and penalty tax payable on a withdrawal of $1,000 made while the annuitant is 50 years old is

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Given an exclusion ratio of 75%, this means 75% of the withdrawal is not taxable, leaving 25% of the $1,000 withdrawal subject to tax. Therefore, $250 is taxable. At a marginal tax rate of 34%, the tax on this amount is $85 ($250 * 34%). Additionally, because the withdrawal is made before the age of 59½, there is a 10% penalty on the entire withdrawal amount of $1,000, which is $100. The total tax and penalty is $185 ($85 + $100).

Assume an Exclusion Ratio of 75 Percent and a Marginal