James Bought an Annuity for $42,000 Several Years Ago

Multiple Choice

James bought an annuity for $42,000 several years ago. The annuity will pay him $250 per month from age 66 until he dies. During the current year, James turns 66 and received his first annuity payment. His life expectancy is 25 years.
I.If James receives more than 260 payments, all payments received after those are totally included in income.
II.James should include $50 of each payment in adjusted gross income.
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A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.