Discussion:IRA Annuitized

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Discussion Forum Index --> Advanced Tax Questions --> IRA Annuitized


Discussion Forum Index --> Tax Questions --> IRA Annuitized

Seaside CPA (talk|edits) said:

17 March 2014
Seventy-five year old taxpayer had an IRA with basis. In trying to determine the taxable amount of the distribution (ie, getting the value as of 12-31-13) it was determined that he had annuitized the IRA. How does one determine the taxable amount of an annuity IRA? I am totally missing something here, I'm sure!

Kevinh5 (talk|edits) said:

17 March 2014
form 8606

JR1 (talk|edits) said:

March 17, 2014
The insurance company holding the funds should report the RMD. In my head it tells me you'd have to work out present values...

Seaside CPA (talk|edits) said:

17 March 2014
I have a letter from the Investment Co. stating that he will receive 10 pmts. at $XXX amount. Kevin, I was trying to use Form 8606, but you need the year-end value in order to calculate. When I asked for it, client said Investment Co. is not providing this. When he contacted co., the letter was sent to him saying he had annuitized IRA and these are the payment amounts going forward. JR1, had not thought of present value. Ugh!!!

Seaside CPA (talk|edits) said:

17 March 2014
It looks like maybe it is calculated using the General Rule. I'll have to research it a little more to be sure.

Southparkcpa (talk|edits) said:

17 March 2014
An IRA, with Basis, put into an annuity? Wow. I totally see the confusion. The year end value should be on the clients year end statement. Cant the client get that?

Seaside CPA (talk|edits) said:

17 March 2014
He gets nothing showing a year-end value. But in thinking about it, I don't think I need it to determine what's taxable. Think I just need to know the IRA basis at this point. Glad you can see why I'm confused & I'm really not going crazy!

JR1 (talk|edits) said:

March 17, 2014
I think you do need year end value. The form won't compute without it. And yes, he probably does get that info but doesn't know. Talk to his financial guy/gal and get it. I've been watching for these just this year, and it's there.

Dennis (talk|edits) said:

17 March 2014
I cast my vote for the 8606, but for different reasons. You can "annuitize" an IRA, but that doesn't turn it into an annuity. There is no "term certain" and the mortality tables do not apply. What you really have is a set of "substantially equal payments" that only last as long as the assets in the account.

JR1 (talk|edits) said:

March 17, 2014
Duh. Always love your insights and clarity Dennis!

Kevinh5 (talk|edits) said:

17 March 2014
Because it is an IRA, the trustee does have to report the year-end value. What is the form they send in May to the IRS? 5498 or something?

Seaside CPA (talk|edits) said:

17 March 2014
Thanks everyone! I'll keep pushing for a year-end value. I originally told client that is what I needed. He called investment person, and they sent above mentioned letter with no value. Per client (don't know who told him this), he will no longer get a 5498 on this. Don't think annuitizing an IRA would change this requirement.

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