IRA/single premium Immediate annuity (SPIA)
If a person moves a IRA into a “single premium immediate annuity(SPIA)” does the IRS view only the annual income from the SPIA as taxable? Someone told me that they can consider the Total SPIA amount as taxable since it is an annuitized annuity.
Which is correct?
Permalink Submitted by Alan Spross on Thu, 2008-03-27 22:50
The SPIA must continue to be in an IRA account, ie. become an “Individual Retirement Annuity”. In that case, only the distributions from the IRA Annuity are taxable.
Taking an IRA distribution and buying a taxable SPIA not in an IRA contract would make the IRA distribution fully taxable. That could also lead to litigation, severe sanctions and including loss of license by the insurance agent advising such a transaction. This would be the case whether the annuity was an SPIA or not.