Taxpayer, age 64, purchases an annuity from an insurance company for $50,000. She is to receive $300 per month for life. Her life expectancy 20.8 years from the annuity starting date. Assuming that she receives $3,600 this year, what is the exclusion percentage and how much is included in her gross income?

The correct answer for exclusion percentage is 66.77% and for included in income in $1,196.

Explanation:

According to the scenario, the given data are as follows:

Purchase value of annuity = $50,000

Value receive per month = $300

Expected life = 20.8 years

So, the exclusion percentage and amount included in her gross income can be calculated by using following formula:

First we calculate expected return in 20.8 years

Expected Return = $300 x 12 months x 20.8 years

= $74,880

Now the exclusion percentage can be calculated as

Exclusion percentage =  Purchase value / Expected return

= $50,000 / $74,880

=  66.77%

So, the exclusion amount will be

Exclusion amount = Amount received in a year × exclusion percentage

= $3,600 × 66.77%

= $2,404

So, the amount included in income can be calculate as:

Included in Income = Amount received in a year - Exclusion amount

= $3,600 - $2,404

= $1,196

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

answer; microeconomics;