I have a 1099-R for a life insurance policy that I rolled into a traditional IRA. This is showing as income, and I now owe federal tax. Can you help?

[ThomasM125]

The codes on the 1099-R in box 7 have a big impact on how the distribution is handled. Can you clarify what codes are in that box and also in boxes 1 and 2a? 

[dmertz]

A life-insurance policy cannot be rolled over to a traditional IRA.  Traditional IRAs are not permitted to hold life insurance policies as investments.  It might be possible to have had a life insurance policy within an employer plan, cashed out that policy, then rolled over the cash to a traditional IRA, but this seems unlikely.

Did you cash out a life-insurance policy and then deposit the cash into a traditional IRA?  This would constitute an ordinary contribution to the traditional IRA independent of the cashing out of the life insurance policy.  The tax consequences of cashing out a life insurance policy are unaffected by what you subsequently do with the cash.