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actuarial equivalent to the present value of the basic annuity.
5 U.S.C. sec. 8343a(c).
I. Taxability of a Lump-Sum Credit
Section 72(e) governs the taxation of amounts received under
an annuity contract but not received as an annuity. Sec.
72(e)(1)(A).3 Section 72(e)(2)(A) provides that any amount
subject to section 72(e) (i.e., an amount received under an
annuity contract but not received as an annuity) shall be
included in gross income if it is received on or after the
annuity start date.4 Section 72(e)(5)(E), however, excludes such
an amount from gross income to the extent the amount received is
in full discharge of a contract.5 Section 72(d) provides, for
3Sec. 72(e)(1)(A) provides:
In general.--This subsection shall apply to any amount
which--
(i) is received under an annuity, endowment, or
life insurance contract, and
(ii) is not received as an annuity, if no
provision of this subtitle (other than this subsection)
applies with respect to such amount.
4Sec. 72(e)(2) provides in pertinent part:
General rule.--Any amount to which this subsection
applies--
(A) if received on or after the annuity starting
date, shall be included in gross income * * *
5Sec. 72(e)(5)(E) provides:
(continued...)
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Last modified: May 25, 2011