Question 1. Jane purchased an annuity contract that pays her $800 per month. The annuity cost her $60,000 and it has an expected return of $100,000. How much of each monthly annuity payment is includible in jane's gross income?
Question 2. Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift and Sam is bankrupt. Which of the following statements is correct concerning the impact of this transaction?
a. Both Bob and Sam recognize $8,000 of taxable income.
b. Bob recognizes $8,000 of taxable income.
c. Sam recognizes $8,000 of taxable income.
d. Neither Bob nor Sam has any taxable income from this transaction.