Question

Six years ago, Gene deposited $250,000 into a nonqualified annuity, and over time the contract has grown to $315,000. This year, Gene, now age 55, would like to withdraw $50,000 to help his daughter with her student loan debt. Which one of the following is representative of the tax implications of such a distribution? A) The distribution would be fully taxable and subject to a 10% early withdrawal penalty. B) The distribution would not be subject to income tax but would be subject to the 10% early withdrawal penalty. C) The distribution would be subject to taxation according to the applicable exclusion ratio. D) The distribution would be fully taxable, but the 10% early withdrawal penalty would not apply.

          Six years ago, Gene deposited $250,000 into a nonqualified annuity, and over time the contract has grown to $315,000. This year, Gene, now age 55, would like to withdraw $50,000 to help his daughter with her student loan debt. Which one of the following is representative of the tax implications of such a distribution?

A) The distribution would be fully taxable and subject to a 10% early withdrawal penalty.
B) The distribution would not be subject to income tax but would be subject to the 10% early withdrawal penalty.
C) The distribution would be subject to taxation according to the applicable exclusion ratio.
D) The distribution would be fully taxable, but the 10% early withdrawal penalty would not apply.

Added by Chad W.

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