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An individual contributed $50,000 to her nonqualified annuity, and when she annuitized the policy, the insurance company determined that, based on her life expectancy, she will receive $100,000 in payments. If her initial monthly payment was $1,000, how much of that payment was taxable?

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dubeyshailja64

Payment of $500 will be taxable, as Non-qualified annuity distributions are never tax-free.

What is a nonqualified annuity?

An individual can acquire a non-qualified annuity apart from an employee benefit. The tax-deferred growth of your investment is a benefit of an annuity.

Working note-

nonqualified annuity of an individual=$50,000

expected distribution=$100,000

initial payment=$1,000

=cost basis/expected distribution

=$50,000/$100,000

=0.50

To calculate how much payment was taxable-

The initial payment will be multiplied by the find rate

                 =$1,000*0.50

                 =$500

Therefore, $500 will be a taxable payment.

Learn more about insurance, here:

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