Ursula owns an annuity that pays her $850 per month until she dies. Which of the following income tax concepts provides for the tax treatment of the annuity payments Ursula receives (and the treatment in the year of death)?
I.Administrative Convenience Concept
II.Annual Accounting Period Concept
III.Capital Recovery Concept
IV.Constructive Receipt Doctrine

A)Only statements I and II are correct.
B)Only statements II and III are correct.
C)Only statements I and IV are correct.
D)Only statement IV is correct.
E)Only statement II is correct.

Question

Ursula owns an annuity that pays her $850 per month until she dies. Which of the following income tax concepts provides for the tax treatment of the annuity payments Ursula receives (and the treatment in the year of death)?
I.Administrative Convenience Concept
II.Annual Accounting Period Concept
III.Capital Recovery Concept
IV.Constructive Receipt Doctrine
​
A)Only statements I and II are correct.
B)Only statements II and III are correct.
C)Only statements I and IV are correct.
D)Only statement IV is correct.
E)Only statement II is correct.

Quizplus · Accepted Answer

The Capital Recovery Concept allows Ursula to recover her investment in the annuity tax-free over the period of the annuity payments. The Annual Accounting Period Concept means that each year's annuity payments are taxed in that year, including the year of death.

Ursula Owns an Annuity That Pays Her $850 Per Month