Form 8606, Line 6 and Line 7 Entries

Submitted by Gale Nelson on Wed, 2022-12-07 21:35

Several questions on Form 8606:
a. When calculating the end-of-year value of all traditional IRA on line 6, in particular, if one’s portfolio contains both qualified brokerage and annuity IRAs, is the end-of-year value the combined value of each separate IRA added together on Form 8606, line 6?
b. If a IRA annuity is annuitized mid-year (i.e., was converted to an income stream), is its end-of-year value, which can be provided by the insurance company, included in the value of all owned IRAs on Form 8606, line 6?
c. If the only distribution from all qualified brokerage and annuity IRAs was a required minimum distribution (RMD), is that the amount to be noted on Form 8606, line 7?
Feedback is appreciated.



Submitted by Alan - IRA critic on Wed, 2022-12-07 23:37

  1. Yes, but if the annuity has no year end value because it had been annuitized, the IRS has not provided guidance on line 6 value reporting for the annuitized IRA. 
  2. Do companies provide such a value after annuitization?  If they do and it makes sense, the taxpayer could use it instead of having to improvise. I suspect the IRS has not provided guidance on this for all these years because of two reasons. Few IRA owners annuitize, and the guidance would probably be convoluted.
  3. Line 7 should show gross distributions from all IRA accounts, whether those amounts were RMDs or not. The only problem is the year end fair market value of any annuitized IRAs after the “investment in the contract” has been turned over to the insurance company.
  4. Non annuitized annuities also present a challenge. The IRS has released different guidelines for valuation of certain fringe benefits for RMD purposes v. for Roth conversion purposes. For these annuities, the insurer is still required to issue a 5498 showing a year end value or send a statement to the IRA owner showing the value. In those cases, that value should be used on the 8606, line 6.


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