Generally, when you cash out a whole life policy, the amount reported in box 1 of the 1099-R will be less than the amount you were actually paid. if so, then more than likely the entire amount in box 1 is taxable.
On a payout of a whole life policy, the payout does not include your premium payments (of course it doesn't). It includes your "investment portion" of the premium you paid, and the earnings on that investment portion. The investment portion you already paid taxes on in the year you paid/invested it. But the earnings become taxable in the tax year you cash out.
So if box 1 is less (probably significantly less) than the total payout, that's a good indicator that the entire amount reported in box 1 is earnings only, and is therefore fully taxable.
