Form 1099-R is used to report distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc.
Proceeds from life insurance policies are generally not taxable to
the recipient, unless the contract itself has been sold or there is
something unusual about the policy. Life insurance companies also sell certain financial products that are sometimes marketed as
"life insurance" policies but do not meet the strict legal definition
of such.
Your best source of determining the taxability of the
proceeds in this case is to look at the Form 1099-R itself. There
should be a payout amount in Box 1 (Gross Distributions). Is there a
similar sum in Box 2a (Taxable Amount), or is the Box 2b (Taxable
Amount Not Determined) checked instead?
If the former, then it is a
taxable policy; if the latter, then it probably is not a taxable
payout, and is indeed a life insurance policy. Regardless, you'll need to enter the Form 1099-R on your tax return this year as the
recipient.
For
further details or an explanation about the proceeds, contact
the insurance company itself. You might also find this IRS FAQ helpful: http://www.irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions...
