Contract in the year of death

Reference no: EM13972672

Duc has been employed by Longbow Corporation for 25 years. During that time, he bought an annuity at a cost of $50 per month ($15,000 total cost). The annuity will pay him $200 per month after he reaches age 65. When Duc dies, his wife, Annika, will continue to receive the annuity until her death. Duc turns 65 in April 2010 and receives 8 payments on the contract. Annika is age 60 when the annuity payments begin.

a. How much gross income does Duc have from the contract in the current year?

b. Assume that Duc dies on April 2, 2020. How does Annika account for the contract in 2020?

c. Assume the same facts as in part b and that Annika dies on August 4, 2027. How does the executor of Annika's estate account for the contract in the year of her death?

Reference no: EM13972672

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