Question

Alex is 63 years old and retired. This year Alex won $212,200 in the state lottery. Alex also received $20,000 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 15 years, for $157,500. Alex received $10,000 in Social Security benefits for the year. Calculate Alex's gross income.

Answer 1

Answer: $230,200

Step-by-step explanation:

In calculating Alex's gross income for the year we will be adding the amount he won from the state lottery to the taxable portions of his Annuity and Social Security benefits.

Taxable Annuity portion.

The formula for this is,

= Income from annuity - Annual return from Annuity

= 20,000 - 157,500/20

= $9,500 is his Annuity taxable portion.

Social Security benefits,

Here the taxable portion is 85% because of Alex's income which would translate to,

= 10,000 * 0.85

= $8,500

Now we add all the figures to find his gross income.

= 212,200 + 9,500 + 8,500

= $230,300

Alex's Gross income for the year is $230,200.