My father's non-qualified annuity 1099-R states the entire distribution is taxable. The distribution code is 7D. The agent said because the distribution is all earnings. I show him IRS's General Rule and think a part of the distribution must be the principle and not taxable. He said that not how they do it in Prudential.
What the agent said is consistent with the company's Q&A.
https://www.annuities.prudential.com/view/page/investor/17095#11
Q.Why is my entire distribution taxable?
For Non-Qualified contracts there are 2 possible reasons:
But it's in conflict with what IRS's General Rule.
https://www.irs.gov/taxtopics/tc411#:~:text=The%20General%20Rule,tables%20that%20the%20IRS%20issues.
The General Rule
If you receive annuity payments from a nonqualified retirement plan, you must use the General Rule. Under the General Rule, you figure the taxable and tax-free parts of your annuity payments using life expectancy tables that the IRS issues.
He is confident about their 1099-R and has decline my requests to appeal the 1099-R.
Am I missing some special rules? If not, what are my options?
