Over the last 20 years, Grant Rock, age 66, has invested $200,000 in a tax-qualified annuity sponsored by his employer, Tombstone Enterprises. The account is currently worth $800,000. He decides to annuitize the contract and begin drawing down the contract balance. In the first year he has received $50,000. How will these distributions be taxed?
A. 100% is taxable as ordinary income
B. 100% is tax-free since Grant is above age 59 1/2
C. Part of the distribution will be taxable at long-term capital gains rates and the balance will be viewed as a return of capital
D. Part of the distribution will be taxable at ordinary income rates and the balance will be viewed as a return of capital
Answer: A
Investment
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- Which TWO of the following statements are TRUE regarding the contract holder of a variable annuity?
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- An advantage of a Coverdell account over a 529 plan is:
- Normally, the largest expense incurred by an open-end investment company is the: