The income tax treatment of payments from annuity contracts is based on the:
I.Capital Recovery Concept
II.Assignment of Income Doctrine
III.Annual Accounting Period Concept
IV.Arm's-Length Transaction Concept

Question

The income tax treatment of payments from annuity contracts is based on the:
I.Capital Recovery Concept
II.Assignment of Income Doctrine
III.Annual Accounting Period Concept
IV.Arm's-Length Transaction Concept
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Quizplus · Accepted Answer

The income tax treatment of payments from annuity contracts is based on the Capital Recovery Concept, which means that only a portion of each payment is considered taxable income, representing a return of the taxpayer's original investment. In addition, the Annual Accounting Period Concept requires that the taxpayer report any income received during the tax year in which it is actually received, rather than when it is earned or accrued. The other two concepts listed, the Assignment of Income Doctrine and the Arm's-Length Transaction Concept, do not directly apply to annuity contracts.

The Income Tax Treatment of Payments from Annuity Contracts Is