Susan purchased an annuity for $200,000.She is to receive $18,000 each year and her life expectancy is 13 years.If Susan collects under the annuity for 14 years, the entire $18,000 received in the 14th year must be included in her gross income.

Question

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According to the IRS regulations, if an annuity pays out beyond the annuitant's life expectancy, any amount received after the life expectancy will be fully taxable as ordinary income. In this case, Susan's life expectancy is 13 years, and if she collects for 14 years, the entire $18,000 received in the 14th year must be included in her gross income.

Susan Purchased an Annuity for $200,000