Hamden is entitled to receive monthly payments of $6,000 over his life from his employer's qualified pension plan.The payments begin January 1,2014.He contributed $286,000 to the plan prior to his retirement at age 62.Using the simplified method,what amount of the payments will be excluded from Hamden's taxable income for 2014?

Question

Quizplus · Accepted Answer

Under the simplified method, the exclusion amount is calculated by dividing the employee's total contributions by a factor based on the age at which the payments begin. For age 62, the factor is 260. Therefore, $286,000 / 260 = $1,100 per month is excluded. For 12 months, $1,100 x 12 = $13,200 is excluded from taxable income.

Hamden Is Entitled to Receive Monthly Payments of $6,000 Over