Quiz: Do You Know These Annuity Tax Facts?

Related — Quiz: Do You Know These RMD Tax Facts?

Some types of guaranteed income annuities utilized today have existed for decades, with billions of dollars in assets annuitized, while others are still best classified as emerging products.

For example, the ongoing proliferation of non-commission-based annuity products has been liberating and exciting for the fee-based financial advisor community, experts say. In fact, advisory industry leaders say their peers must work harder to update their understanding of what is available in the annuity marketplace because things have changed so dramatically.

While there is a lot for the uninitiated advisor to consider, one sensible place to start is with some annuity tax facts. Explore the slideshow to find ThinkAdvisor’s latest Tax Facts Quiz, focused on essential tax concepts pertaining to annuities and guaranteed retirement income.

Only the tax-savviest can ace the test, but all advisors can benefit from the refresher.

Want more tax-focused insights? Find current and accurate answers to your tax questions with Tax Facts.

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Quiz: Do You Know These Annuity Tax Facts?

Related — Quiz: Do You Know These RMD Tax Facts?

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Which section of the Internal Revenue Code governs the taxation of payments received under annuity contracts?

a. The rules in IRC Section 72 govern the income taxation of all amounts received under nonqualified annuity contracts.

True or False:

True.

Are death proceeds payable under a single premium annuity and life insurance combination included in an annuitant’s gross estate?

b. Yes, although such combination contracts are uncommon in today’s marketplace.

True or false:

True.

What are the income tax consequences to the owner of an annuity contract if the owner sells the contract?

b. If an annuity is sold, the amount of taxable gain is determined in the same way as on surrender of a contract.

True or False:

False.

How is the purchaser of an existing immediate annuity contract taxed?

c. If the purchaser receives lifetime proceeds under the contract, the purchaser is taxed in the same way as an original owner would be taxed, but with a new cost basis.

True or False:

False.

What is the estate tax value of a survivor’s annuity under a joint and survivor annuity contract?

a. The value is the amount the same insurance company would charge the survivor for a single life annuity as of the date of the first annuitant’s death.

What are the income tax consequences to the surviving annuitant under a joint and survivor annuity?

a. The survivor continues to exclude from gross income the same percentage of each payment that was excludable before the first annuitant’s death.

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Quiz: Do You Know These Annuity Tax Facts?

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Related — Quiz: Do You Know These RMD Tax Facts?

More on this topic

Which section of the Internal Revenue Code governs the taxation of payments received under annuity contracts?

a. The rules in IRC Section 72 govern the income taxation of all amounts received under nonqualified annuity contracts.

True or False:

True.

Are death proceeds payable under a single premium annuity and life insurance combination included in an annuitant’s gross estate?

b. Yes, although such combination contracts are uncommon in today’s marketplace.

True or false:

True.

What are the income tax consequences to the owner of an annuity contract if the owner sells the contract?

b. If an annuity is sold, the amount of taxable gain is determined in the same way as on surrender of a contract.

True or False:

False.

How is the purchaser of an existing immediate annuity contract taxed?

c. If the purchaser receives lifetime proceeds under the contract, the purchaser is taxed in the same way as an original owner would be taxed, but with a new cost basis.

True or False:

False.

What is the estate tax value of a survivor’s annuity under a joint and survivor annuity contract?

a. The value is the amount the same insurance company would charge the survivor for a single life annuity as of the date of the first annuitant’s death.

What are the income tax consequences to the surviving annuitant under a joint and survivor annuity?

a. The survivor continues to exclude from gross income the same percentage of each payment that was excludable before the first annuitant’s death.

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