Which of the following is a true statement about the first payment received from a purchased annuity?
A)The payment is included in gross income.
B)A portion of the payment is a return of capital.
C)The payment can only be taxed in the year after the annuity was purchased.
D)The payment is not taxed until the annuity payments cease altogether.
E)All of these choices are correct.

Question

Quizplus · Accepted Answer

When an annuity is purchased, a portion of the payment is considered a return of capital rather than income. This means that only the portion of the payment that represents earnings or gains will be included in gross income for tax purposes. The rest of the payment will not be taxed as income. This applies to the first payment received from the annuity, as well as all subsequent payments.

Which of the Following Is a True Statement About the First