All the following statements regarding annuities owned by a corporation that cover key employees are correct EXCEPT:

A) annuity benefits payable to the corporation with the key employee as annuitant are income tax free to the corporation.

B) if the corporation surrenders the deferred annuity for its cash value, the amount of the cash surrender value is greater than the corporation's basis in the contract, subject to income taxation to the corporation.

C) there are no income tax consequences to the key employee/annuitant.

D) premiums paid by the corporation are not tax deductible.

Answer: A) annuity benefits payable to the corporation with the key employee as annuitant are income tax free to the corporation.

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