Permalink Submitted by mk foss on Mon, 2008-10-27 17:14
How are you determining the loss? If the IRA annuity was purchased with nondeductible contributions and if it is the only IRA or if all IRAs are being closed out the same year, then a loss may be available (if there still is one).
Such a loss is an ordinary deduction subject to the 2% limitation. The loss is not allowed in the AMT calculation.
Permalink Submitted by Alan Spross on Tue, 2008-10-28 01:40
It could be an IRA holding an annuity along with other investments, or a separate IRA annuity account purchased directly from an insurer.
When an annuity is in an IRA, the IRA tax rules trump annuity tax rules. For example, if a Roth IRA annuity was closed out along with all the client’s other Roth IRAs, the itemized deduction would be available. Most people do not have enough basis in TIRA accounts to develop a loss, but the rule is the same, ie if the closing values of all TIRAs is less than the Form 8606 basis, the itemized deduction is available. The 2% of AGI floor applies as does AMT limits. A taxpayer need to close all IRA accounts of the same type only, ie all Roths or all TIRAs, as the rule applies separately to each type of IRA.
If the annuity is a NQ annuity outside an IRA, each annuity stands on it’s own with respect to total surrender and the itemized deduction.
Permalink Submitted by mk foss on Mon, 2008-10-27 17:14
How are you determining the loss? If the IRA annuity was purchased with nondeductible contributions and if it is the only IRA or if all IRAs are being closed out the same year, then a loss may be available (if there still is one).
Such a loss is an ordinary deduction subject to the 2% limitation. The loss is not allowed in the AMT calculation.
Permalink Submitted by charles lore on Tue, 2008-10-28 01:29
What is meant by an IRA annuity? is it a traditional IRA that has an annuity as a holding?
Permalink Submitted by Alan Spross on Tue, 2008-10-28 01:40
It could be an IRA holding an annuity along with other investments, or a separate IRA annuity account purchased directly from an insurer.
When an annuity is in an IRA, the IRA tax rules trump annuity tax rules. For example, if a Roth IRA annuity was closed out along with all the client’s other Roth IRAs, the itemized deduction would be available. Most people do not have enough basis in TIRA accounts to develop a loss, but the rule is the same, ie if the closing values of all TIRAs is less than the Form 8606 basis, the itemized deduction is available. The 2% of AGI floor applies as does AMT limits. A taxpayer need to close all IRA accounts of the same type only, ie all Roths or all TIRAs, as the rule applies separately to each type of IRA.
If the annuity is a NQ annuity outside an IRA, each annuity stands on it’s own with respect to total surrender and the itemized deduction.