Question

George purchased a life annuity for $2,000 that will provide him $50 monthly payments for as long as he lives. Based on IRS tables, George's life expectancy is 100 months. How much of the first $50 payment will George include in his gross income

Answer 1

The amount included in his gross income is $30

Step-by-step explanation:

The computation of the amount included in his gross income is shown below:

The Amount to be involved in gross income is

= First amount - (purchase value of a life annuity ÷ expectancy life)

= $50 - ($2,000 ÷ 100)

= $50 - $20

= $30

Hence, the amount included in his gross income is $30

We simply applied the above formula so that the correct amount could come