If a whole life policy lapsed with no cash value and it resulted in taxable income being reported, it means the policy had an outstanding loan. If you received the Form 1099-R then you were the owner of the policy. If you were the owner of the policy then no one else should have been able to take out a loan on the policy. You need to contact the insurance company. Your only recourse is to go to the insurance company and try to have a corrected Form 1099-R issued with zero taxable income. You can't dispute this on your tax return. If you can't get the insurance company to issue a corrected Form 1099-R you will have to report the income on your tax return.
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