Thank you for your reply!
A follow-up, if you don't mind: For all sense and purposes the money is my German retirement account (retirement "insurance") which I set up from the US in 2004, because my employer here didn't, and because I expected to go back eventually. At the end of this 30 year contract in 2034 I could have chosen a lump sum or annual retirement payments until the end of my life. By canceling this insurance early, the current lump sum I receive is barely above the sum of all of my payments (a net gain of ~9,000 EUR), and I have a table in my original contract to show this. The insurance starts to produce more significant gains in the last 10 years only, which I don't benefit from, since I'll cancel it in December. If I understand you correctly, I should report these ~ 9,000 EUR (~$10,000) to the IRS, using 1099-R? I can live with that, even though all gains of this insurance are tax-free in Germany (since it ran longer than 12 years). But to determine the exact cost basis over the course of 20 years sounds horror!
