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A customer, age 60, has a fixed annuity contract with a value of $16,000. The cost basis in the contract is $10,000. If the customer withdraws $5,000 and the IRS taxes distributions on a LIFO basis, the tax consequence of a withdrawal will be:

Respuesta :

sandlee09

Answer:

$5,000 taxable

Explanation:

In this scenario, the tax consequence of withdrawal will be $5,000 taxable. This is because annuity contract contributions are not tax-deductible, meaning that the original contribution of $10,000 has already been taxed. Therefore in this situation all $5,000 will be taxable, luckily since the individual is over the age of 59 1/2 then the distribution is not subjected to a 10% penalty tax for premature distribution.

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