Anne purchased an annuity from an insurance company that promised to pay her $35,000 per year...

Anne purchased an annuity from an insurance company that promised to pay her $35,000 per year for the next ten years. Anne paid $236,250 for the annuity, and in exchange she will receive $350,000 over the term of the annuity.

a. How much of the first $35,000 payment should Anne include in gross income?(Do not round intermediate calculations.)
b.How much income will Anne recognize over the term of the annuity?

Solutions

Expert Solution

a. Amount to be included in gross income for $35,000 payment = $35,000 - ($236,250/10)

= $35,000 - $23,625

= $11,375

b. Amount of income to be recognized over the term of annuity = $350,000 - $236,250

=$113,750

ekkarill92 answered 2 years ago

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