1099-R---Death of Spouse

[Bees Knees]

You cannot do one from a spouse to the other spouse. This was apparently paid out to the wife who was a named beneficiary on the contract of the annuitant who died.

You can roll it over if the spouses were joint owners of the annuity. The OP does not clarify this.

[taxea]

Thanks so much!!! It was rolled over into another annuity.

Make sure there is documentation of the rollover and that it was done correctly or you may still have a taxable/not taxable issue.

If it was rolled over why is there no G designation?

[Burke]

You are correct in that you can do a 1035 exchange from one annuity to another annuity as long as you are the annuitant on both contracts, and it is done properly with you taking no possession of the proceeds. You cannot do one from a spouse to the other spouse. This was apparently paid out to the wife who was a named beneficiary on the contract of the annuitant who died.

[DaveO]

A direct "rollover" of an annuity is a Section 1035 exchange with a code of 6 in box 7. Any time you cash out an annuity it is taxable no matter what you do with the money. It is up to the owner of the annuity to figure their basis in a non qualified account. The agent should provide the required numbers.

[Super Mom]

when I said above you have to make sure she qualified for a rollover, it's because we all have clients who say "I rolled it over". Then we come to find out a year later they "rolled" it over into a regular CD at a bank, not having understood what a true rollover is.

If it were an IRA of her deceased husband, of course she could have rolled it over into one of her own. In that case the issuer would not have issued a 1099R. But he did. And you said gross amount in box 1 differes from box 2, taxable amount.

What are those two figures?

Figures are approximate--total distribution 23,000 taxable portion 8,000 premiums paid 15,000
Thanks for the help everyone I want to help this widow as much as possible, but want to do it right too!

[Burke]

Thus far, my research is telling me that transfer of ownership is usually taxable, but not between spouses. Voting not taxable??

You are all mixed up on this. The non-taxable transfers between spouses refers to gift taxes, not income taxes.

[Burke]

First of all, IS this an IRA? Is the IRA box checked? If it is NOT an IRA, there is no "rollover" of a non-qualifed annuity. . If it WAS an IRA, then she had the right to roll it over into one of hers, or into a new one in her name. (Which also has to be an IRA.) And in re-reading the OP, the investment guy seemed to verify that it was a NON-qualifed annuity. So that means, it was NOT an IRA. So it is taxable. Now, if the proceeds paid out were less than the original amount deposited when the annuity was taken out, there may be some deduction on Sche A. It is easy enough to find out that information from the company. I don't know what he may have meant by it being "underwater" but that he did not have the cost basis available. So how could he tell? But the fact that it actually shows a gross amt and a different taxable amount tells me that they have taken his original contribution into consideration. That amount is not taxable. The earnings are. The only thing the spouse does not have (due to Code 4) is a penalty for early distribution, assuming she is under 59 1/2.

[ChEAr$]

I'm still leaning towards not taxable on this, any opposite opinions?

when I said above you have to make sure she qualified for a rollover, it's because we all have clients who say "I rolled it over". Then we come to find out a year later they "rolled" it over into a regular CD at a bank, not having understood what a true rollover is.

If it were an IRA of her deceased husband, of course she could have rolled it over into one of her own. In that case the issuer would not have issued a 1099R. But he did. And you said gross amount in box 1 differes from box 2, taxable amount.

What are those two figures?

[Super Mom]

I'm still leaning towards not taxable on this, any opposite opinions?

[Super Mom]

I'm still researching this, please help!

[Super Mom]

I double checked with the investment person, and he verified that it was directly rolled over, that's as much as I know about qualifications.

[ChEAr$]

This would not be spousal continuation if she rolled it over directly??? She didn't get the money, it was put into an annuity with a different company in her name.

Are you sure she was eligible to roll it over? And if so, was it a direct rollover or did she first get the check before buying an annuity with some insurance company?

If it's the latter, then you have two separate events. First one is taxable.

[Super Mom]

Well now, her husband died, she got the money, so it's taxable.

This would not be spousal continuation if she rolled it over directly??? She didn't get the money, it was put into an annuity with a different company in her name.

[ChEAr$]

Well now, her husband died, she got the money, so it's taxable.

[Super Mom]

Thanks so much!!! It was rolled over into another annuity.