Sharon owns a fixed deferred annuity contract with a 7-year surrender period, which she purchased at age 50 for $60,000. Now, 5 years later, she cashes in the contract for its $65,000 accumulated value. All of the following statements are correct EXCEPT A) Sharon will pay capital gains taxes on $65,000 OB) Sharon will pay ordinary income taxes on $5,000 OC) Sharon will pay a $500 penalty to the IRS D) Sharon will pay a surrender charge to the insurer
Sharon owns a fixed deferred annuity contract with a 7-year surrender period, which she purchased at age 50 for $60,000. Now, 5 years later, she cashes in the contract for its $65,000 accumulated value. All of the following statements are correct EXCEPT A) Sharon will pay capital gains taxes on $65,000 OB) Sharon will pay ordinary income taxes on $5,000 OC) Sharon will pay a $500 penalty to the IRS D) Sharon will pay a surrender charge to the insurer
Chapter2: Gross Income And Exclusions
Section: Chapter Questions
Problem 14P
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![Sharon owns a fixed deferred annuity contract with a 7-year surrender period, which she purchased at age 50
for $60,000. Now, 5 years later, she cashes in the contract for its $65,000 accumulated value. All of the
following statements are correct EXCEPT
A) Sharon will pay capital gains taxes on $65,000
B) Sharon will pay ordinary income taxes on $5,000
C) Sharon will pay a $500 penalty to the IRS
OD) Sharon will pay a surrender charge to the insurer](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb60c3d47-86a2-478c-9ef5-aa89654d8b45%2F456d689c-45d1-42e4-8c49-af67714adb40%2Fyguk0eq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Sharon owns a fixed deferred annuity contract with a 7-year surrender period, which she purchased at age 50
for $60,000. Now, 5 years later, she cashes in the contract for its $65,000 accumulated value. All of the
following statements are correct EXCEPT
A) Sharon will pay capital gains taxes on $65,000
B) Sharon will pay ordinary income taxes on $5,000
C) Sharon will pay a $500 penalty to the IRS
OD) Sharon will pay a surrender charge to the insurer
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