Generally, inherited property (including cash, stocks, and real
estate) is not taxable or reportable on a personal 1040 federal return.
However,
any income earned from an inheritance such as interest, dividends,
rent) or capital gains will be taxable on a federal return.
An
inheritance will be taxable if you inherit an IRA, 401(k) or other
retirement account (i.e., any distribution out of those accounts would be).. That would be considered "income in respect of a
decedent" which is earned by a deceased person prior to death. Because
it was paid after death the income is taxable to the recipient in the
year paid.
When you receive form 1099-R from the Trustee or the Financial Institution who is managing the Annuity you
will follow the instructions in the FAQ below. It will be quite simple,
entering a 1099-R is like entering the information from a W2, you only
enter the information from the boxes that contain information.
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