Michael purchased an annuity from an insurance company that promised to pay him $42,000 per year...
Michael purchased an annuity from an insurance company that promised to pay him $42,000 per year for the next 15 years. Michael paid $304,500 for the annuity, and in exchange he will receive $630,000 over the term of the annuity. How much of the first $42,000 payment should Michael include in gross income?
Homework Answers
| a. | Amount to be included in gross income | = | [($630000 - $304,500) / $630000] X $42000 | |
| = | 0.5167X $42000 | |||
| = | $ 21,700 | |||
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