In: Accounting
Clark, a 40-year-old single taxpayer, contributed $25,000 to a commercial annuity in 2015. The annuity is a nonqualified plan. In 2019, before the annuity start date, Clark took a nonperiodic distribution of $2,500 and used the money to pay off his credit card debt. If the value of the annuity at the time of the distribution was $30,000, how much of the distribution is taxable?
$0
$417
$500
Answer:
Give Data:
Total Contribution = $25,000,
Nonperiodic Distribution Taken = $2.500,
Assumed Value of the Annuity Distribution = $30,000,
Taxable Distribution:
If we withdraw the annuity before the start date then 10% of Portion is taxable.
Clark Taxable Distribution = $25,000 * 10%
= $2,500.
The answer is $2,500.