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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11372
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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If my mother has been getting an immediate annuity payment a

Customer Question

If my mother has been getting an immediate annuity payment for about a year. It has a guaranteed minimum payout for 10 years but she dies in year one and I am the beneficiary and will get the remaining payout by lump sum, is there an income tax tied to it that I now must pay because the cost basis was $90,000 and the payout total will be $130,000?
Submitted: 11 months ago.
Category: Tax
Customer: replied 11 months ago.
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Customer: replied 11 months ago.
If my mother has been getting an immediate annuity payment for about a year. It has a guaranteed minimum payout for 10 years but she dies in year one and I am the beneficiary and will get the remaining payout by lump sum, is there an income tax tied to it that I now must pay because the cost basis was $90,000 and the payout total will be $130,000. My phone number is(###) ###-####
Expert:  Lane replied 11 months ago.
Hi,...Depending on the terms of this specific annuity contract you may have some choices....If you take the funds in a lump sum you will be taxed on the difference between the 130,000 and the basis of 90,000....You will receive a 1099R...You will also likely have the ability to take withdrawals out over a five year period (better said get the money out within five years). Whatever amount is taken in a given tax year will be taxed UNTIL you have reached the point where you are pulling out basis....You can also take the annuity out over your own life expectancy. ...If you ANNUITIZE (one way to take out over your life expectancy) the payments you receive will be a prorated return of principal (not taxable) and the growth in the annuity (taxable).... just as with the immediate annuity with your mother....If you simply make withdrawals over your life expectancy, the withdrawals will, again, be fully taxable until you "reach" principal. Withdrawals after that will be a return of principal....Please let me know what questions you have from here....Lane......I hold a law degree (JD, Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security/Medicare, estate, corporate, both for-profit and non-profit, and tax advice, since 1986
Customer: replied 11 months ago.
lane I appreciate your answer but I was asking for a CPA or accountant. Your qualifications are impressive but they are the same as my moms insurance agent. I needed an answer from a accounting professional.