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How the annuity payments are taxed

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Reference no: EM132885042

Question 1: King Midas receives a life annuity from his qualified pension that pays him $7,000 per year for as long as he lives. Later this year he will recover the remainder of his cost of the annuity. Which of the following correctly describes how the annuity payments are taxed after he has recovered the cost of the annuity?

Group of answer choices

Option 1: The entire amount of each annuity payment is excluded from gross income after King Midas recovers his cost of the annuity.

Option 2: King Midas will continue to apply the annuity exclusion ratio to determine the amount of each annuity payment includible in gross income.

Option 3: All of these

Option 4: King Midas must request that the IRS calculate his exclusion ratio based upon a revised life expectancy.

Option 5: King Midas will include the entire amount of each annuity payment in gross income after he recovers the cost of the annuity.

Reference no: EM132885042

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