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tax law question. Thank you

Section 9 Question 29 of 30. incorred RICK, a retired single taxpayer, began receiving a monthly pension from his former empo

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Answer #1

ANSWER:

Correct answer is: $6,857

Explanation:

To calculate tax free portion of gross distribution, one has to divide one's investment in contract by the number of monthly payments from the appropriate IRS table. For age 66, from relevant IRS table, the number of monthly payments = 210

As such monthly tax free amount = $20,000 / 210

Tax free amount for the year = ($20,000 / 210) * 12 = $1,143

Hence taxable amount = $8,000 - $1,143 = $6,857

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