! Required information [The following information applies to the questions displayed below.] Larry purchased an annulty

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! Required information [The following information applies to the questions displayed below.] Larry purchased an annulty from an Insurance company that promises to pay him $6,000 per month for the rest of his life. Larry paid $630,720 for the annulty. Larry is in good health and is 72 years old. Larry received the first annulty payment of $6,000 this month. Use the expected number of payments in Exhibit 5-1 for this problem.

a. How much of the first payment should Larry Include in gross income? Amount to be included in gross income

b. If Larry lives more than 15 years after purchasing the annuity, how much of each additional payment should he include in gross income? Amount to be included in gross income

c. What are the tax consequences if Larry dies just after he receives the 100th payment? Answer is complete but not entirely correct. Amount to be deducted $ 268,840 x

EXHIBIT 5-1 Table for Expected Age at Annuity Starting Date 68 69 70 71 72 Return Multiple for Ordinary Single-Life Annuity Expected Return Multiple 17.6 16.8 16.0 15.3 14.6