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A NY client wants to fund a Roth IRA inside a deferred annuity contract. Under NY law and federal rules, which statement is correct regarding the Roth-IRA annuity wrapper?

ANY prohibits annuities from holding Roth IRA assets
Contributions are not deductible federally or for NY income tax, but qualified withdrawals are tax-free at both the federal and NY level; Reg 187 best-interest standard still applies to the sale
CAll withdrawals from a Roth annuity are taxed as ordinary income in NY regardless of qualified status
DNY requires Roth annuities to be sold only through banks

Why this is the answer

Roth IRAs use after-tax contributions (no federal or NY deduction) and produce federally tax-free qualified withdrawals (age 59½ + 5-year aging) — NY conforms, so qualified withdrawals are also free of NY income tax. NY does not bar annuity issuers from being IRA custodians (A is wrong), does not tax qualified Roth withdrawals as ordinary income (C wrong), and does not channel-restrict Roth annuities (D wrong). Critically, the wrapper choice itself (annuity vs mutual fund vs CD) is a Reg 187 best-interest analysis — adding M&E and surrender charges inside a Roth IRA must be justified by features (death benefit, lifetime income rider) that the consumer needs.

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