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joja [24]
3 years ago
7

George purchased a life annuity for $3,200 that will provide him $80 monthly payments for as long as he lives. Based on IRS tabl

es, George's life expectancy is 100 months. How much of the first $80 payment will George include in his gross income?
Business
1 answer:
IRISSAK [1]3 years ago
8 0

Answer:

$48

Explanation:

Data provided in the question:

Life annuity = $3,200

Monthly payments = $80

George's Life expectancy = 100 months

Now,

The annuity exclusion ratio = \frac{\textup{Life annuity }}{\textup{Life expectancy}}

or

The annuity exclusion ratio = \frac{\textup{3,200}}{\textup{100}}

or

The annuity exclusion ratio = $32

Therefore,

Return on capital per payment = $32

Hence,

The amount of the first $80 payment will George include in his gross income = $80 - $32

= $48

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