Death Benefit

[Earl]

Can anyone help me determine the taxability of a police officers death benefit.

Client received $50,000 from State of Alabama when her husband died. He was a police officer who died about 10 years after he retired. State sent her a check for $50,000. 1099R received showing taxable.

Any way it could be non-taxable

[Earl]

Other booksite

On the other books site someone cited 101h as reason it is taxable. Anyone have anything futher on this. Just want to be sure I am not missing something. Hate to see a widow hit with a $13,000 tax bill just because of this.

[Koss]

Death Benefit

The fact that your client's spouse died "ten years after he retired," and the fact that the payment has been reported on Form 1099-R lead me to believe that you are dealing with a fairly transparent payout of some sort from the decedent's retirement plan.

The big question that I have is whether the spouse at some point had the option of taking periodic payments instead of a lump-sum. Or is she getting a continuation of his pension in addition to the single payment?

How is the 1099-R coded? It must be Code 4, Death.

Was it a 403(b) plan? If not, what was it? Some sort of traditional pension plan for government employees?

You or your client may be confusing this payment with something else: life insurance. Form 1099-R is also used for payments from annuities and life insurance policies.

Sometimes there is a special payment to the surviving spouse of a police officer killed in the line of duty.

But this guy retired, and then died.

What type of entity is the payor on the Form 1099-R?

Burton

[Earl]

Death Benefit

1099r issued by State of Alabama. She does receive a continuation of his pension which is shown on a separate 1099r. Also has a 1099r from policemen's pension fund which is shown on 1099r and is periodic payments and shown as not taxable.

The $50,000 paid is not just for government employees. Volunteer firemen also eligible for this award. Leaning toward it being taxable since paid so long after retirement, however, spouse says that if he had died 2 months later (after 10 years from date he last worked) he would not have been eligible for the payment.