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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15300
Experience:  15years with H & R Block. Divisional leader, Instructor
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My wife and I file jointly. We are retired. We live on our

Customer Question

My wife and I file jointly. We are retired. We live on our social security income, small pensions and small IRA distribution. Last year my wife (born 1942) cashed in a life insurance policy and we received a 1099-R showing $16,308 box 2a taxable income. If I report this on line 16a it increased the amount of tax on our social security benefits. May I report this on Foam 4972?
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.


No unfortunately the cashing in of a life insurance policy is ordinary income. The form 4972 would not be appropriate for this.

Section 61(a) provides that, except as otherwise provided in the income tax provisions of the Code, gross income includes all income from whatever source derived, including (but not limited to) income from life insurance contracts. § 61(a)(10).

§ 72(e)(5)(A) requires that the amount be included in gross income but only to the extent it exceeds investment in the contract. This is why you have a lower taxable amount than gross.