Annuity Surrender Charge

[beck]

OK Tax gurus!

Annuity surrender charge. Expense or not? My client changed annuity companies and had to pay the surrender charge.

Thanks in advance,
Beck

[Burke]

Are you thinking as an investment expense? I don't think so. l I have never seen it treated as such.

[beck]

Hi Burke......why could that not be an investment expense?

[New York Enrolled Agent]

OK Tax gurus!

Annuity surrender charge. Expense or not? My client changed annuity companies and had to pay the surrender charge.

Thanks in advance,
Beck

FWIW, check IRS publ 575 - IRS says a loss on Schedule A with the 2% cut. There is controversy about this but the Pub is the only "guidance".

[Burke]

Investment Expense:

It must meet one of two rules: The expense must be incurred "(1) to produce or collect income; or (2) to manage property held for producing income." See Pub 550, Chapter 3.

[AZ-Tax]

Had similiar situation

Beck, your clients insurance annuity was sold by an licensed insurance agent. That agent should have his or her license pulled for this. I had a client with similiar situation several years ago and I concluded it definitely could lnot go on Sch D and I believe I put it on Sch A "unrecovered investment in annuity".

[beck]

Beck, your clients insurance annuity was sold by an licensed insurance agent. That agent should have his or her license pulled for this. I had a client with similiar situation several years ago and I concluded it definitely could lnot go on Sch D and I believe I put it on Sch A "unrecovered investment in annuity".

So, does that mean that the annuity being moved from one company to another should not have been charged the surrender charge?