McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 64

Larry purchased an annuity from an insurance company that promises to pay him $1,500 per month for the rest of his life.Larry paid $170,820 for the annuity.Larry is in good health, and he is 72 years old.Larry received the first annuity payment of $1,500 this month.Use the expected number of payments in Exhibit 5-1 for this problem.a.How much of the first payment should Larry include in gross income?
b.If Larry lives more than 15 years after purchasing the annuity, how much of each additional payment should he include in gross income?
c.What are the tax consequences if Larry dies just after he receives the 100 th payment?