Explain briefly how annuity distributions are taxed
What will be an ideal response?
When distributions occur out of an annuity contract the payment is split into principal and interest by an exclusion ratio. This assumes that the deposits were made with after tax dollars. Interest is taxable, principal is not. The exclusion ratio applies until the basis in the contract is recovered. With withdrawals made before 59 there is a 10% penalty unless the distribution is taken as an annuity.
You might also like to view...
Convertible bonds can be exchange for a fixed number of shares of the issuing corporation's stock.
Answer the following statement true (T) or false (F)
Connor Publishing's preferred stock pays a dividend of $1.00 per quarter, and it sells for $55.00 per share. What is its effective annual (not nominal) rate of return?
A. 6.62% B. 6.82% C. 7.03% D. 7.25% E. 7.47%
The Economic Espionage Act of 1996 prohibits the theft of trade secrets and provides criminal penalties for violations
a. True b. False Indicate whether the statement is true or false
The first step in a financial analysis of a company includes:
A. ratio analysis. B. pro forma balance sheet construction. C. statement of cash flows construction. D. profit and loss analysis. E. pro forma income statement construction