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relates to the taxation of annuities and certain proceeds of
endowment and life insurance contracts. Section 72(e) is
applicable to amounts received under an annuity contract but
which are not received as an annuity. The distribution received
by petitioner falls into this category. Sec. 1.72-2(a)(1),
Income Tax Regs. Under the general rule, amounts received before
the annuity starting date are included in income to the extent
such amounts are allocable to income on the contract, and not
included in income to the extent such amounts are allocable to
the investment in the contract. Sec. 72(e)(2)(B). Section
72(c)(4) defines the annuity starting date as the first day of
the first period for which an amount is received as an annuity
under the contract.
The record indicates that the distribution petitioner
received in July 1989 was the first and only distribution that
petitioner received from the Plan. The record also indicates
that the distribution at issue was not received as an annuity,
but rather as a lump-sum distribution of the balance of
petitioner’s account. The record further indicates that the
distribution occurred prior to the annuity starting date. Thus,
section 72(e)(2)(B) applies. Under section 72(e)(2)(B), amounts
which are allocable to the investment in the contract will not be
included in income. Section 72(e)(6) defines investment in the
contract as of any date as:
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Last modified: May 25, 2011