Annuity contract purchased in 1999, cousin would like to make a partial redemption. Approximately 1/3 of total value. How is this taxed, part initial contribution? tks all.
- posted
10 years ago
Partial annuity redemptions
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- posted
10 years ago
Assuming this is not a pre 8/14/1982 contract... the rule is gain comes out first followed by basis.
Example: Basis is $100,000. Now worth $110,000. Withdrawal is $5000. All $5000 taxable as gain. T/P will get a 1099-R reflecting that. Additionally, it is taxed as ordinary income and subject to the 10% early withdrawal penalty if the t/p has not attained age 59 1/2.
Same example as above, except withdrawal is $37,000. Taxable gain is $10,000. Remaining $27,000 is a return of principal and reduces basis to $73,000.
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- posted
10 years ago
Doesn't the tax treatment depend on whether or not the plan is qualified or non-qualified, and whether periodic distributions have started?
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- posted
10 years ago
Based on the content of the OP, I assumed this was a distribution before the annuity starting date from a nonqualified plan.