Gramps purchased a joint survivor annuity that pays $1,350 monthly over his remaining life and that...
Gramps purchased a joint survivor annuity that pays $1,350 monthly over his remaining life and that of his wife, Gram. Gramps is 70 years old and Gram is 65 years old. Gramps paid $299,376 for the contract. How much income will Gramps recognize on the first payment?
Homework Answers
this joint survivor annuity has an annual return multiple of 23.1 from table (vi) in Reg. sec.1.72-9.
the expected return is 1350*12*23.1 = $374,220 (annual payment * annual return multiple)
gramps paid $299,376 fr this contract
thus return on capital is 299376/374220 * 100 = 80%
hence 20% will be income
therefore first payment consists of 1350*20% = $270 of income
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