The correct answer is B) Kennedy will owe taxes on the full $100,000.
A single premium deferred annuity is a type of investment that allows an individual to deposit a lump sum of money into the contract, and then receive regular payments at a later date, typically during retirement. The growth on the investment is tax-deferred until the funds are withdrawn.
When Kennedy surrenders the contract for a lump sum distribution after ten years, she will owe taxes on the entire amount of growth, which is the difference between the initial investment of $50,000 and the current value of $100,000. The amount of taxes owed will depend on Kennedy's tax bracket and other factors. However, because Kennedy is under the age of 59½, she may also owe an additional 10% penalty on the taxable amount.