Question

Connor purchased an annuity that was to pay him a fixed amount each month for the remainder of his life. He began receiving payments in 2003, when he was 65 years old. (see Exhibit 4.1) In 2019, Connor was killed in an automobile accident. What are the effects of the annuity on Connor's final tax return? The capital investment in the annuity can be as a on Connor's final tax return.

Answer 1

Annuity received is taxable income at Conor's death and must be included in the gross income while filing tax return.

Step-by-step explanation:

The amount received as an Annuity is taxable and must be included in the gross income while filing the tax returns. This means that the related costs will also be deducted e.g, fees paid, etc. However the return that wasn't received would not be considered as income as Conor didn't received it. Hence the annuity received is treated as taxable income and must be included in the gross income.