Alan and Jackie are husband and wife and live in Arizona. In 2000, they purchase

Question

Alan and Jackie are husband and wife and live in Arizona. In 2000, they purchased a commercial annuity for $300,000 using community funds. Under the terms of the contract, $3,750 a month is payable to them for Alan's life. If Alan predeceases Jackie, $3,300 a month is payable to Jackie. Alan dies in the current year when the replacement value of Jackie’s annuity is $150,000. Which does Alan's estate include as to the annuity?

a.     $0
b.     $50,000
c.     $75,000
   d.    $150,000
    e. None of the above

Explanation / Answer

a.     $0

Justification : Life insurance proceeds are counted as part of a decedent's estate, they resemble inherited property & such inherited property is excluded from tax.

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