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Tax consequences of the annuity payments

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Reference no: EM132758919

Petra recently sold her home and purchased an annuity with the proceeds. The annuity Petra purchased will begin making payments in five years. When Petra asks you about the tax consequences of the annuity payments, which of the following is the CORRECT response that you should provide Petra?

a) The full annuity payment will be taxable income.

b) The amount of interest to be declared for income tax will not change.

c) Petra will have no taxable income until the year of the first payment.

d) Petra will pay less tax in the later years of the annuity contract.

Reference no: EM132758919

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