4. at the age of 50, margaret invested $50,000 in a fixed annuity. seven years later, the contract is worth…

4. at the age of 50, margaret invested $50,000 in a fixed annuity. seven years later, the contract is worth $68,000, and margaret takes a $10,000 withdrawal. which of the following statements is true? (search chapter 13) a. the $10,000 withdrawal is received tax free. b. the $10,000 withdrawal is subject only to income tax. c. the $10,000 withdrawal is subject only to a penalty tax. d. the $10,000 withdrawal is subject to both income tax and a penalty tax.

4. at the age of 50, margaret invested $50,000 in a fixed annuity. seven years later, the contract is worth $68,000, and margaret takes a $10,000 withdrawal. which of the following statements is true? (search chapter 13) a. the $10,000 withdrawal is received tax free. b. the $10,000 withdrawal is subject only to income tax. c. the $10,000 withdrawal is subject only to a penalty tax. d. the $10,000 withdrawal is subject to both income tax and a penalty tax.

Answer

Answer:

D. The $10,000 withdrawal is subject to both income tax and a penalty tax.

Explanation:

Step1: Understand annuity rules

Annuity withdrawals before age 59.5 are usually taxed.

Step2: Check Margaret's age

Margaret is 50 + 7=57 years old at withdrawal.

Step3: Determine tax - status

Since she is under 59.5, the withdrawal is subject to income tax and a 10% early - withdrawal penalty tax.