Jay,a Single Taxpayer,retired from His Job as a Public School

Jay,a single taxpayer,retired from his job as a public school teacher in 2010.He is to receive a retirement annuity of $1,000 each month and his life expectancy is 150 months.He contributed $30,000 to the pension plan during his 35-year career;so his adjusted basis is $30,000.What is the correct method for reporting the pension income?

A) Since Jay is no longer working,none of the pension must be included in his gross income.
B) The first $30,000 received is a nontaxable recovery of capital,and all subsequent annuity payments are taxable.
C) The first $120,000 he receives is taxable and the last $30,000 is a nontaxable recovery of capital.
D) For the first 150 months,20% ($30,000/$150,000) of the amount received is a nontaxable recovery of capital and the balance is included in gross income.
E) None of the above.