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Posted by Frederick Lorca on April 16, 2007, 12:09 am
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> I heard that annuity death benefits were only taxed at 10%,
> but I can't find anywhere else on the 1040 that the income
> (annuity value minus the annuity cost) would be entered.
Not True. The taxable portion is taxed at the recipient's,
i.e., the beneficiary's, marginal tax rate.
> Also, isn't the beneficiary's basis in inherited property
> the fair market value at the time of death. If that's the
> case here then would there be little or no tax on the
> lump-sum distribution?
No. An inherited annuity is considered Income in Respect of
a Decedent (IRD). The decedent's cost or basis carries over
to the beneficiary. Report the gross distribution on line
16a and the taxable amount on line 16b. If any income tax
was withheld, claim that on line 64.
Frederick Lorca
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