Annuity distribution question

[Art]

Taxpayer (son) received a 1099R from Metlife which showed $5865 in box 1 and a code 4 (death) in box 7. Nothing was reported in any other boxes on the form. I contacted the administrator for the mother’s estate who stated that this was the proceeds from cashing out the MetLife Flex Premium Annuity and that the taxpayer was 1 of 3 named beneficiaries of the policy. The mother had been receiving a 1099R for many years which showed $ 1200 in box 1 and box 2, fully taxable. Question is this distribution taxable? My understanding is the step-up rules do not apply to annuities so that is not available. Since the prior reporting showed the distributions as 100% taxable, it does not appear that there is any unrecovered basis that could be a part of the distribution porceeds so are we stuck reporting this as 100% taxable?

I would really appreciate input from anyone who had experience in this issue.

[Burke]

You are correct. There is no step-up basis on annuities and the entire amount is taxable to the beneficiaries. No 10% penalty due to code 4, payable due to death of annuitant.

[Art]

Thanks for the reply. It is always good to have this forum to post questions.