[Imi]

On October 1, 2017, Cruz purchased an annuity for $90,000 in post-tax dollars, effective immediately, that pays Cruz $500 a month until death. At the date of purchase, Cruz’s official life expectancy was 25 years. How much of Cruz’s 2017 annuity payments should be included in cruz’s gross income for 2017?

Answer: $600

Can someone please explain how they got 600? My answer is coming as $200

Base amount: $90,000
Expected Return: $150,000
90,000/150,000 = 60%
500 * 60% = 300 Not taxable
500 * 40% = 200 taxable and should be included in gross income

Am I doing this right? I am so confused.

[monikernc]

He received 3 payments in 2017. 3x$200=$600

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Imi]

That was so simple. I should have read the question carefully lol. Thank you Moni.

[monikernc]

That’s ok. One reason you study is to learn to read the questions. It is the most important skill to have during the exam. Plus you are probably psyching yourself out or telling yourself it’s too hard. Positive self-talk is key. You can do this!

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Author]

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