Sharon owns a fixed deferred annuity contract with a 7-year surrender period, which she purchased at age 50for $60,000. Now, 5 years later, she cashes in the contract for its $65,000 accumulated value. All of thefollowing statements are correct EXCEPTA) Sharon will pay capital gains taxes on $65,000B) Sharon will pay ordinary income taxes on $5,000C) Sharon will pay a $500 penalty to the IRSOD) Sharon will pay a surrender charge to the insurer

Annuity is like a deal between the individual and the insurance company, The individual gives them a…

Answered: Sharon owns a fixed deferred annuity…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Oscar purchases an annuity in 2000 for $450,000 which will pay him $90,000 a year for life starting at age 65. His life expectancy at age 65 is 20 years. He receives $90,000 during 2021 which is the year in which he turns 68. He will report as income for 2021 of: 90,000 77,500 22,500 zero none of the above
Faith, a single taxpayer, age 81, forgot to take her 2021 required minimum distribution (RMD) from her traditional IRA. Her account balance on December 31, 2020, was $240,000. What is her excess accumulations penalty? $24,000 $13,408 $6,704 $0
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Mindy, who is 44 years old, has five IRAs. On January 12th, she converts $40,000 in IRA 2, which is a traditional IRA, into a Roth IRA. On March 25th, she takes a distribution of $20,000 from IRA 1. On May 20th, she rolls over the $20,000 into IRA 4. Which of the following statements is correct? Mindy owes tax and penalty on $40,000 Mindy owes tax and penalty on the $20,000 because it represents her second rollover during the year. The $20,000 rollover qualifies for the 60-day rollover exception. Mindy owes ordinary income tax on $60,000 but no penalty.
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