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Which of the following terms refers to the nontaxable portion of each annuity benefit payment?

A) Principal
B) Interest
C) Dividend
D) Exclusion ratio

User Najathi
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1 Answer

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Final answer:

The nontaxable portion of each annuity benefit payment is referred to as the Exclusion ratio, which is used to determine the part of the annuity that is a return of investment and is not subject to tax.

Step-by-step explanation:

The term that refers to the nontaxable portion of each annuity benefit payment is D) Exclusion ratio. When an individual receives annuity payments, part of each payment can be considered a return of the principal initially invested, which is not taxed. The exclusion ratio is a calculation used to determine what portion of the annuity payment is a return of this principal and is thus nontaxable. The remaining part of the payment is usually considered interest and may be subject to taxation.

User David Goldfarb
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