Taxpayer purchased an annuity from an insurance company that promised to pay her $2,200 per month for the rest of her life

Finance Jun 23, 2021

Taxpayer purchased an annuity from an insurance company that promised to pay her $2,200 per month for the rest of her life. Taxpayer paid $310,464 for the annuity and is 69 years of age. Determine the amount of the first payment Taxpayer must include in gross income.

Expert Solution

Computation of Amount of the first payment Taxpayer must include in gross income:

Expected return multiple based on age group (age 69) = 16.80

Expected Value of payments (16.8122200) = $443,520
Exclusion percentage (310,464/443,520) = 70%
Exclusion amount (2200*70%) = $1,540

Amount to be included (2200 - 1540) = $660

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