My mother passed away in 2012. As executor of her will, I received a check from Genworth Financial for an annuity/life insurance policy that she had. I took this money and divided it equally between my brother and sister as directed in the will. I recently received a 1099R for this payment. I thought that only interest earned on the policy was taxable but my tax advisor says I am responsible for reporting the entire amount on my tax return. Is this correct?
SAVAGE SAYS: Ok, what’s important here is the definition of what you received. Was it a life insurance policy — or a tax-deferred annuity. Contact Genworth and ask, giving them the account number and other info you have. Sounds like it was an annuity. In that case, the portion that was not areturn of original investment would be taxable. I’m not sure why the entire amount would be taxable — unless it was an annuity purchased inside an IRA, where none of the money had been previously taxed. But Genworth should be able to tell you the details. And maybe they can distribute 1099R forms appropriately to each of your siblings. Get back to me if you still have trouble getting answers from them.