My mother passed away in 2021 and she held a non-qualified annuity in a revokable family trust that was tied to her SSN. When she died, the trust automatically converted to a non-revokable trust that required us to obtain an EIN.
My brother and I are beneficiaries of the annuity. We received a check for the full distribution amount in 2022 (the check was paid to the family trust). Today, I received the 1099-R for the distribution, which is tied to the EIN of the revokable trust, as expected. My understanding is that there is no stepped-up cost basis for the annuity. The distribution code is "4D" (Death/Annuity Payments), which appears to be correct.
Questions:
1. Is it correct to assume that we're stuck paying taxes at the federal tax rate for trusts (37% in our case) for the capital gains shown in Box 2a?
2. Is there anything else I should know or do related to this topic when filing our 2022 tax return?
Thanks.
