Which type of annuity would Chuck purchase if he wanted to incur the highest income tax in the first year?

To determine which type of annuity would generate the highest income tax in the first year, it's important to understand how different annuities are taxed. In general, the tax treatment of an annuity is influenced by its classification (prescribed vs. accrual) and the amount of the initial premium.

An accrual annuity is taxed on the income earned each year, which usually results in higher immediate taxation when compared to a prescribed annuity. Prescribed annuities, on the other hand, offer a method where the tax burden can be spread out over the life of the annuity, allowing for tax-efficient withdrawals.

In this case, among the options provided, the accrual annuity with the higher initial premium of $100,000 would generate the highest taxable income in the first year. This is because a larger initial premium leads to greater potential income earned, and since accrual annuities are fully taxable on that income as it arises, the tax implications in the first year would be maximized.

Thus, selecting the accrual annuity with a $100,000 initial premium would indeed lead to the highest income tax in the first year, due to the combination of the annuity type being fully taxable and the larger