
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
A6)

Transcribed Image Text:A 72-year-old customer asks his registered representative (RR) to begin required minimum distributions (RMDS) from a
qualified annuity. The withdrawals will be taxed in which of the following ways?
AO Both the principal and interest portions of the RMD are taxed as ordinary income.
BO The principal portion of the RMD is taxed as a long-term capital gain, and the interest portion is taxed as a
short-term capital gain.
CO The RMD will be treated on a first-in, first-out (FIFO) basis, meaning the principal comes out first as non-
taxable and interest second as taxable.
DO
The RMD will be treated on last-in, first-out (LIFO) basis, meaning interest comes out first as ordinary income
and principal last as non-taxable.
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