Your 66-year-old customer invested $35,000 in a nonqualified variable annuity. It now has a value of $55,000, and your customer wishes to make a random withdrawal of $30,000.

What is the tax liability that results if the customer is in the 28% tax bracket?

A) $8,400. B) $0. C) $2,800. D) $5,600

Question

Business

Averie

14 September, 18:51

Your 66-year-old customer invested $35,000 in a nonqualified variable annuity. It now has a value of $55,000, and your customer wishes to make a random withdrawal of $30,000.

What is the tax liability that results if the customer is in the 28% tax bracket?

A) $8,400. B) $0. C) $2,800. D) $5,600

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Answers (1)

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Sebastian Mcpherson · Answer 1

D) $5,600

Explanation:

Since the client has a nonqualified annuity, his/her payments were done on an after tax basis. That means that only the earnings would be subject to taxation, his/her basis is equal to his $35,000 investment.

If the client withdraws $30,000, only $20,000 will be taxed ( = $55,000 - $35,000) at his/her tax rate = $20,000 x 28% = $5,600

Your 66-year-old customer invested $35,000 in a nonqualified variable annuity. It now has a value of $55,000, and your customer wishes to make a random withdrawal of $30,000.What is the tax liability that results if the customer is in the 28% tax bracket?A) $8,400. B) $0. C) $2,800. D) $5,600

Your 66-year-old customer invested $35,000 in a nonqualified variable annuity. It now has a value of $55,000, and your customer wishes to make a random withdrawal of $30,000.

What is the tax liability that results if the customer is in the 28% tax bracket?

A) $8,400. B) $0. C) $2,800. D) $5,600