On July 1, 2000, when Betty was 65 years old, she purchased an annuity contract for $108,000.

Question:

On July 1, 2000, when Betty was 65 years old, she purchased an annuity contract for $108,000. The annuity was to pay Betty $9,000 on June 30 each year for the remainder of her life. Betty died on August 31, 2013. What are the effects of the annuity on Betty's gross income and taxable income for 2013?

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,...