annuities_soltion

# annuities_soltion - Solution Annuities Part 1 Annuity paid...

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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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## This note was uploaded on 09/09/2011 for the course TAX 6845 taught by Professor Kelliher,c during the Fall '08 term at University of Central Florida.

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annuities_soltion - Solution Annuities Part 1 Annuity paid...

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