We received an inheritance in 2021 of what we thought was a Life Insurance Policy, but it appears it was a tax deferred annuity of some type. We received a 1099-R, with no IRA box checked, with very little contribution and a lot of Tax liability. My question is a) isn't there any step up for this? and b) if not, is there a way to spread this out over 10 years? My guess is that this was an annuity that she contributed to at one point and it grew over the years. Both my Federal and State returns have been dramatically affected. Anything I can do?
Thank you.
