Question

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 1

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.