What is stated about the tax treatment when a corporation owns an annuity?

• A. There is no tax deferral benefit on any earnings.
• B. Tax deferral benefits apply.
• C. Earnings are tax-free.
• D. Gains are taxed at capital gains rates.

Answer: (A)

When a corporation owns an annuity, the earnings don’t receive a special tax deferral benefit just because the owner is a corporation. The growth inside the contract is not treated with any corporate-specific deferral advantage, and the earnings aren’t taxed at favorable capital gains rates. Instead, when the annuity pays out or is surrendered, the earnings portion is included in the corporation’s ordinary income and taxed at corporate rates. In short, corporate ownership does not provide a tax deferral benefit on earnings, and those earnings are not tax-free.