dmertz
Level 15

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For a distribution from an nonqualified annuity paid to a beneficiary, the codes in box 7 would be 4 and D.

 

The Form 1099-R says that you were paid $56,731.90, so the question is where did the $45,231.90 go?  It seems unlikely that there would have been a $45,231.90 loan from the plan that was paid off with an offset, so based on the Form 1099-R the $45,231.90 must have gone somewhere for your benefit and is taxable income.  The tax code does not permit the entire $11,500 of investment in the contract to be paid out without also having paid out the $45,231.90 to you.  Rollover of the $45,231.90 shown on this form was not permitted, so it can't be in a retirement account.  It seems that the amount you actually received would have been the entire $56,731.90 and there is no good reason that this would have been provided as a payment separate from the $11,500.  (Although doubtful, if somehow under the terms of the annuity you were only eligible to be paid the investment in the contract, the Form 1099-R is wrong.)

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