Question

"A customer invests $50,000 in a non-qualified variable annuity. Over the years, it has grown in value to $110,000. The customer’s cost basis in the annuity contract is::"

Answer 1

Answer:

The customer's cost basis in the annuity contract is $50,000.

Explanation:

The customer's cost basis in the annuity contract is the initial payments or premiums made in an annuity amounting to $50,000.  This amount is usually taxed at the initial point.  This implies that the $110,000 which the annuity has accumulated to will no longer be taxed.  The customer will enjoy her lump sum and withdrawals undisturbed by the Internal Revenue Service.