Hank Hurler was drafted by the San Juan Expos as the number 1 draft pick in the major league baseball draft last year. As part of his signing bonus, the Expos paid Imprudent Insurance Co. $500,000 for a single premium annuity policy that would pay Hank $100,000 a year for the next 10 years. In addition, the Expos promised to purchase a second identical annuity policy if and when Hank made the major leagues. After spending last year playing in the minor leagues with the St. Petersburg Bay Manta Rays, this year Hank made the big leagues and the Expos purchased the second annuity contract. How much gross income must Hank recognize?

Answer rating: 100% (QA)

To determine how much gross income Hank Hurler must recognize we need to consider the tax implicatio... View the full answer