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Question

A single taxpayer retires from his job in 2009. His retirement annuity is $1000 and life expectancy is 150 months. He contributed 30,000 to the pension plan during 35yrs of his career. What is the correct method for reporting the pension income? a.the first 30,000 received is a nontaxable recovery of capital, and all subsequnet annuity payments are taxable b.Since he is no longer working, none of the pension is included in his gross income. c. The first 120,000 is taxable and the last 30,00 is a non-taxable recovery of capital d.for the first 150 months, 20%(30,000/150,000) of the amount received is a nontaxable recovery of capital and the balance is included in gross income e. none of the above

Submitted: 58 days and 8 hours ago.
Category: Tax
Value: $15
Status: CLOSED

Accepted Answer

 

During annuitization period a portion of each annuity payment represents a non-taxable recovery in the contract and the balance of each payment is considered taxable income.

 

d. for the first 150 months, 20%(30,000/150,000) of the amount received is a nontaxable recovery of capital and the balance is included in gross income

 

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Expert: LEV
Pos. Feedback: 99.3 %
Accepts: 
Answered: 9/26/2009

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