Code F on 1099r Charitable gift annuity

[Chuck Inama]

How much of a Charitable Gift Annuity is taxable income?????? I have a client who has a Gross Distribution of $8822 and a taxable amount shown in box 2a of $7485. Also box 3 which is capital gains shows $3979. How much is taxable income that would be shown on line 16b of the 1040???? The IRS thinks it should be $7485 and the HR Block software I use says only $3506 is taxable income, which is the difference between the $7485 and the $3979.

Thanks for any thoughts you have on this.

[kathyc2]

That is a pretty simple question to answer, but perhaps you could answer a question first.

Do you work for a H&R Block office, or are you using the DIY software? If DIY, how are you entering your paid preparer information?

[Snaggletooth]

Answer

Answer is $7485. Years ago there used to be an option to calculate a different amount which involved the capital gains portion of the distribution. I believe this option is unavailable unless the taxpayer was born before 1936 and meets other criteria.

But for all these years the 1099-R has been reporting a capital gains portion, whether relevant or not.

I've edited to scratch all the above. Just realized he was referring to a charitable gift annuity.

[taxea]

That is a pretty simple question to answer, but perhaps you could answer a question first.

Do you work for a H&R Block office, or are you using the DIY software? If DIY, how are you entering your paid preparer information?

I have the same questions. Inquiring minds want to know. What does line 16 on the 1040 say when you input the 1099?
I think the IRS knows better than HRB.

[Burke]

I think the IRS knows better than HRB.

That's a good one. OP should review IRC 1.1011-2-a, especially example 8. That might answer his question.

[Gene V]

How much of a Charitable Gift Annuity is taxable income?????? I have a client who has a Gross Distribution of $8822 and a taxable amount shown in box 2a of $7485. Also box 3 which is capital gains shows $3979. How much is taxable income that would be shown on line 16b of the 1040???? The IRS thinks it should be $7485 and the HR Block software I use says only $3506 is taxable income, which is the difference between the $7485 and the $3979.

Thanks for any thoughts you have on this.

my software (Lacerte) computes the same way. Line 16b $3506, the capital gain of $3979 goes to Schedule D.
Per 1099 instruction: line 2a includes the capital gain from line 3

[Burke]

And that, I believe, is correct. There is both ord income and capital gain treatment.

[FEDUKE404]

Information should be with tax documents ?

Can't speak for Block software or as Block employee.

Just curious: Does the Form 1099-R have the letter "F" in box 7 *AND* was that information duly entered into the tax software? Did you try going the Q&A data entry route, which often can be quite helpful when encountering "unusual" situations where jumping into the deep water with "forms" might generate some potential problems?

I think Snaggletooth was referring to the special (one time??) lump-sum distribution treatment that involved a Form 4972. Because of the IRS rules, to even start to consider that option the plan participant must have been born before January 2, 1936. It's been a couple of decades since I filled out one of those. . .

Not having the Form 1099-R in front of me, it would seem to me that if there is an entry of $7,485 in the "taxable amount" box of the document, that might be a good starting point. . .

I also found the summary (in layman's language) below, which may have some merit.

FE

Taxation of Gift Annuity Payments

If the gift annuity is funded with cash, part of the payments will be taxed as ordinary income and part will be tax-free. If funded with appreciated securities or real estate owned more than one year, and the donor is receiving the annuity payments, part of the payments will be taxed as ordinary income, part as capital gain, and part may be tax-free. The charity that issues the annuity will send a Form 1099-R to the annuitant. This form will specify how the payments should be reported for income tax purposes. For details regarding the taxation of gift annuity payments, it is wise to consult with representatives of the charity as well as your financial advisors.