VA Policy Surrender

[Lion]

As you requested, your $10000 government life insurance policy has been surrendered to the VA for the cash value. The enclosed check is for the net amount payable.
Cash Value $8,273.00
Dividend Paid $197.40
Dividend Cred/Dep $9,531.54
Total Credits/Net Amount Payable $18,001.94

Client received a check for the total amount. He's good about watching over his money and listed one of the amounts -- $9,531.54 -- as a Form 1099 dividend/STCG. He didn't receive a Form 1099, just the check stub as quoted above. HELP. What do I report and where?

[Lion]

Checkmark?

So, what's the check mark mean?

[Lion]

No help at the VA Insurance Help Desk

When the client called the VA, they told him the $9,500+ part was taxable. When I called, they said government insurance is NOT taxable even for a surrendered policy. Does this follow along the lines of the commercial policy surrendered in another thread?

[Lion]

Bump

Bump to help me out while my mind melts

[Bees Knees]

I don't know, and I doubt anyone could know. Insurance is always a big question mark because some life insurance pays taxable dividends and interest, while others do not. When cashed, some generate a taxable 1099-R and others do not.

I researched this many years ago and came to the conclusion that you wait to see whether a 1099-INT is issued for the earnings, or whether a 1099-R is issued when funds are distributed. If so, they are taxable. If not, they are not.

Have the client call and see whether a 1099-INT or 1099-R was issued.

[Lion]

Will Do

Will do. Thank you, Bees.