Richard, who retired on April 30, 2016, receives a monthly employee annuity benefit of $1,400 payable for life, beginning May 1, 2016. During his years of employment, Richard contributed $29,400 to the company's plan. Richard's age on May 1 is 66. Using the simplified method, how much of the $11,200 annuity payment received during 2016 may Richard exclude from gross income?

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Under the simplified method, Richard can exclude a portion of his annuity payments based on his contributions and life expectancy. The exclusion amount is calculated by dividing his total contributions by the number of anticipated payments. For someone aged 66, the IRS table provides a number of 210 payments. Thus, $29,400 / 210 = $140 per month. For 8 months in 2016, the exclusion is $140 x 8 = $1,120.

Richard, Who Retired on April 30, 2016, Receives a Monthly