I have this same issue: A Form 1099 R from New York Life with an amount in box 1, the same amount in box 8 and code W in box 7. I think the gist of the discussion here is correct: No Form 5329 should be created and that the solution is to simply delete the Form 1099 R.
I write separately to note (1) this seems to be bug, or at least an improvement opportunity, in the TurboTax software; and (2) upon a close reading of New York Life's "Instructions for Recipient," the instructions for box 1 include the following:
If a charge or payment was made against the cash value of an annuity contract or the cash surrender value of a life insurance contract for the purchase of qualified long-term care insurance, an amount will be shown in this box and code W will be shown in box 7. You need not report these amounts on your tax return.
Also, the instructions for box 8 include the following:
If charges were made for qualified long-term care insurance contracts under combined arrangements, the amount of the reduction in the investment (but not below zero) in the annuity or life insurance contract is reported here.
