# Lola, age 62, began receiving a \$2,000 monthly annuity in the current year upon the death of her husband. She

## Question:

Lola, age 62, began receiving a \$2,000 monthly annuity in the current year upon the death of her husband. She received eight payments in the current year. Her husband contributed \$40,000 to the qualified employee plan. Use the Simplified Method Worksheet below to calculate Lola’s taxable amount from the annuity.

Simplified Method Worksheet

1. Enter total amount received this year.                                1. _______________

2. Enter cost in the plan at the annuity starting date.           2. _______________

3. Age at annuity starting date

Enter

55 and under……………………….. 360

56–60………………………………..     310

61–65……………………………….     260                                          3. _______________

66–70……………………………….     210

71 and older……………………….. 160

4. Divide line 2 by line 3.                                                          4. _______________

5. Multiply line 4 by the number o monthly payments

this year. If the annuity starting date was before 1987,

also enter this amount on line 8, and skip lines 6 and 7.

Otherwise, go to line 6.                                                            5. _______________

6. Enter the amount, if any, recovered tax free in prior     6. _______________

years.

7. Subtract line 6 from line 2.                                                  7. _______________

8. Enter the smaller of line 5 or 7.                                          8. _______________

9. Taxable amount this year: Subtract line 8 from line       9. _______________

1. Do not enter less than zero.

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...

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Related Book For

## Income Tax Fundamentals 2015

ISBN: 9781305177772

33rd Edition

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven Gill

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