Question

An investor has held a non-tax qualified Variable Annuity for 10 years. His contributions have been $26,000 and the current value of the account is $36,000. Prior to the annuitization period, the customer withdraws $15,000. What is the tax liability, assuming the customer's tax bracket is 28%? (A) $2,800 (B) $4,200 (C) $10,000 (D) $15,000

Answer 1

The answer is: A) $2,800

Step-by-step explanation:

To calculate the tax liability we must first calculate the gain the investor had from his variable annuity.

The current value of the account is $36,000 and he invested $26,000, so his profit (or gain) is $10,000.

If his tax rate is 28%, then his tax liability will be $10,000 x 28% = $2,800