annuities_soltion

annuities_soltion - Solution: Annuities Part 1: Annuity...

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Solution : Annuities Part 1: Annuity paid over fixed period . In January of 2010, Bayleigh (60 years old) purchased an annuity from TAMU Insurance Company. The annuity cost her $99,000 and will pay her $1,000 per month for the next 15 years. Required : How much does Bayleigh have to include in her gross income for 2010? Annuity exclusion ratio = $99,000/($1,000 per month x 12 x 15 years) = $99,000/$180,000 = 55% Return of capital = $6,600 ($12,000 x 55% exclusion ratio). Amount included in gross income = $5,400 ($12,000 – $6,600 return of capital). Part 2: Single-life annuity . In January of 2010, Bayleigh (60 years old) purchased an annuity from TAMU Insurance Company. The annuity cost her $99,000 and will pay her $600 per month over the remainder of her life. Required : (a) How much does Bayleigh have to include in her gross income for 2010? Annuity exclusion ratio = $99,000/($600 per month x 12 x 24.2 1 ) = $99,000/$174,240 = 56.8% Note 1 : Expected return multiple found in Table V – Ordinary life annuities – One life (U.S. MTG 825). Age is determined by using birthday nearest annuity
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annuities_soltion - Solution: Annuities Part 1: Annuity...

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