Discussion:1099R Code 7 distribution
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Discussion Forum Index --> Tax Questions --> 1099R Code 7 distribution
| 31 May 2008 | |
| HI, if someone could point me in the right direction, it would be great. My mother has an issue with an annuity (I prefer to refer to it as a scam, as it was a fee-generating instrument guaranteed never to make money). The annuity was liquidated in 2006 and the sale not reported on her taxes. Apparently she never received or lost the form 1099R that was sent to the irs by the financial firm.It was an 'ING Get Fund Series V' variable annuity purchased in 2003; sale of the instrument resulted in a loss $10,264.
I have a simple question: The IRS refers to this sale as 'retirement income'... So does that mean that it is handled differently then schedD capital G/L ? Or can it be simply treated as such & if so can the LT cap. loss be carrie forward. Thanks in advance! | |
| 31 May 2008 | |
| I have a simple answer to a simple question -
Consult a tax professional. | |
| 31 May 2008 | |
| First of all I strongly suspect your mother lost the 1099R because this liquidation ( distribution) requires that specific form and most trustees do a good job of following the law and issuing it .
Uncle Sam's suggestion is excellent because this is a complex area and you have not provided enough information to properly answer your question Your mother's loss may be deductible depending on a number of factors including the funding of the variable annuity must have come from after tax funds.(not IRA or other qualified money) If it is deductible it would go on Schedule A -Miscellaneous deductions subject to the 2% AGI limitation. If deductible you would have to file an amended return. (1040 X for 2006) This definitely does not go through Schedule D due to the nature of it being a variable annuity product. The reference by IRS to "retirement income" is correct because any distribution flows through a form 1099R which is titled in part "distributions from pensions,annities ,retirement .life insurance contracts ,etc etc ". Hope this helps . | |
| 1 June 2008 | |
| HI Thank u for your reply to this post and the information.
OK, not a schedule D item. The IRS has sent her a notice that they intend on 'adjusting her 2006 income' to reflect this ~121K in retirement income resulting from the sale. Accordingly, she needs to file an amended 2006 to reflect this. At this point I do not understand how or where the sale / income is reported, and how to take into acct the cost basis for the instrument. Putting the issue of deducting the los aside for a minute, the primary conceern is that she not end up with a tax liability for this loss-making transaction. Could you please comment. The fundins at time of purchase was from money she had in a brokerage acct; not from income. I am not sure what other necessary info you were refering to, but would be happy to supply. Thank you | |
| 1 June 2008 | |
| Stop being so stubborn.
Seek a tax professional for proper remedy. We are NOT here to hold your hand. | |
| 1 June 2008 | |
| Hi & thanks for your post / replies. I do plan on consulting with a tax proffesional. I like to understand the relevent code / rules and mechanisms prior to blindly accepting the recommendations of my tax proffesional, however. FYI - I have had an issue in the past where I followed such advise only to find out years later that I was liable for the mistakes of someone else. Ultimately the liability will be mine (or in this case my mother) & I am exercising due dilligence. | |
| 1 June 2008 | |
| Patrick ,
There are numerous code sections and rules relating to your mothers situation. If we cited them ,in all honesty, I do not think it would benefit you .
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| 3 June 2008 | |
| You need to get a copy of the 1099-R as well. The IRS gets the box 1a amount: total distribution. As an annuity, there should also be an amount in box 5 showing the basis. If she got a CP2000, which is likely, you don't file an amended return; you need to address the notice. ING most likely has the 1099-R available online; if not, a call to the company can usually get you a copy. You need to address this ASAP..you get 30 days to respond to the notice. this type of thing is easy to clear up if you know what you are doing, and can be a nightmare if you do it wrong. Make sure your tax pro knows how to address an IRS audit. | |
| 3 June 2008 | |
| yup, see a tax pro NOW. You don't even know what you don't know. | |
| 3 June 2008 | |
| I've handled about 5-6 CP 2000 notices this year (2006 returns ) relating to non reporting of income (Tax documents 1099 B, 1099Div , 1099R ) and in each case IRS give the taxpayer an option of completing an amended return instead of submitting some other kind of documentation (Schedule D etc).
In some cases I find it more efficient to complete the the amended return, particularly in cases involving failure to report qualified dividends and capital gains. I prefer to be in the position of calculating the correct tax liability rather than IRS as well as stop the clock ticking on interest. | |
