distribution from non-qual annuity
I have a client that sold their non-qual annuities (1993 inception) and purchased mutual funds. They have a taxable gain. I know there were some tax changes around 2014 regarding 1099 Code 7d, but to my knowledge the gain is taxed as ordinary income. Is this true?
Thank you.
Permalink Submitted by Alan - IRA critic on Mon, 2016-02-29 23:55
The new D code is intended to identify NQ annuites whose gains are subject to the 3.8% net investment income tax, but this tax only applies if AGI exceeds fairly substantial amounts. If AGI does not exceed these amounts, the earnings are taxed at ordinary income rates excluding the NIIT. https://www.law.cornell.edu/uscode/text/26/1411