how is this withdrawal taxed?   A. $9217 of the withdrawal is considered to be a tax-free return of her principal and $10.783 is both taxable as ordinary income and subject to the 10% early withdrawal penalty   B.The $20.000 is treated as a tax-free return of her basis.   C.The $20,000 is both taxable as ordinary income and subject to the 10% early withdrawal penalty.   D.The $20.000 is simply treated as taxable, ordinary income.

SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter17: Business Tax Credits And The Alternative Minimum Tax
Section: Chapter Questions
Problem 32P
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When Michelle was 48 years old, she invested $100,000 into a deferred annuity. Eight years later, the value of the annuity is $217.000, If Michelle makes a $20,000 withdrawal from the annuity, how is this withdrawal taxed?
 
A. $9217 of the withdrawal is considered to be a tax-free return of her principal and $10.783 is both taxable as ordinary income and subject to
the 10% early withdrawal penalty
 
B.The $20.000 is treated as a tax-free return of her basis.
 
C.The $20,000 is both taxable as ordinary income and subject to the 10% early withdrawal penalty.
 
D.The $20.000 is simply treated as taxable, ordinary income.
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