Chapter 4, Problem 70IIP

In each of the following problems, identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify.

Ariel has worked for Sander Corporation for 30 years. Sander has a pension plan in which it matches employee contributions by up to 5 percent of the employee’s salary. Ariel, who is single, retires during the current year when she is 66 years old. Her pension plan contains payments and earnings of $300,000, half of which are attributable to payments made by Ariel and half attributable to payments made by Sander. Under the plan, Ariel is to receive $2,000 per month until she dies.