how is this withdrawal taxed? A. $9217 of the withdrawal is considered to be a tax-free return of her principal and $10.783 is both taxable as ordinary income and subject to the 10% early withdrawal penalty B.The $20.000 is treated as a tax-free return of her basis. C.The $20,000 is both taxable as ordinary income and subject to the 10% early withdrawal penalty. D.The $20.000 is simply treated as taxable, ordinary income.
how is this withdrawal taxed? A. $9217 of the withdrawal is considered to be a tax-free return of her principal and $10.783 is both taxable as ordinary income and subject to the 10% early withdrawal penalty B.The $20.000 is treated as a tax-free return of her basis. C.The $20,000 is both taxable as ordinary income and subject to the 10% early withdrawal penalty. D.The $20.000 is simply treated as taxable, ordinary income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
When Michelle was 48 years old, she invested $100,000 into a deferred annuity. Eight years later, the value of the annuity is $217.000, If Michelle makes a $20,000 withdrawal from the annuity, how is this withdrawal taxed?
A. $9217 of the withdrawal is considered to be a tax-free return of her principal and $10.783 is both taxable as ordinary income and subject to
the 10% early withdrawal penalty
B.The $20.000 is treated as a tax-free return of her basis.
C.The $20,000 is both taxable as ordinary income and subject to the 10% early withdrawal penalty.
D.The $20.000 is simply treated as taxable, ordinary income.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education