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Your 66-year-old customer invested $35,000 in a nonqualified variable annuity. It now has a value of $55,000, and your customer wishes to make a random withdrawal of $30,000.
What is the tax liability that results if the customer is in the 28% tax bracket?
A) $8,400.B) $0.C) $2,800.D) $5,600

Answer :

jepessoa

Answer:

D) $5,600

Explanation:

Since the client has a nonqualified annuity, his/her payments were done on an after tax basis. That means that only the earnings would be subject to taxation, his/her basis is equal to his $35,000 investment.

If the client withdraws $30,000, only $20,000 will be taxed (= $55,000 - $35,000)  at his/her tax rate = $20,000 x 28% = $5,600

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