Over the 15 years that she owned her nonqualified variable annuity, Kate invested a total of $25,000 into the contract. At the age of 70, she annuitized the contract's full $50,000 value under a straight life option. According to IRS life expectancy tables, Kate is expected to live 16 years.
During the first year of annuitization, Kate received $4,500. How much of that income is taxable?
