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IRA, account number 0400014416, which was invested in a
certificate of deposit that was earning 1.75 percent. On that
same day, petitioner withdrew the entire amount, $39,295.08, from
the IRA and closed the account. The amount withdrawn from the
IRA was transferred into a nonqualified annuity through American
Express Life Insurance Company (AEL).3 The nonqualified annuity
consisted of the funds from the closed IRA and additional funds
added by petitioner.
In 1999, petitioner received a 1998 Form 1099-R,
Distributions From Pensions, Annuities, Retirement or Profit-
Sharing Plans, IRAs, Insurance Contracts, Etc., from the bank
relating to his IRA, account number 0400014416. The Form 1099-R
reported a gross distribution of $39,295.08 and a taxable amount
of $39,295.08.
Petitioner did not include the $39,295.08 reported on the
Form 1099-R on his 1998 Form 1040, U.S. Individual Income Tax
3On the “Annuity Contract Data and Application”, completed
in connection with the transfer of funds from petitioner’s
individual retirement account (IRA) to the nonqualified annuity,
there is a section entitled “Annuity Plan” and an instruction to
check one of three boxes indicating different annuity plans. The
box for “Nonqualified Annuity” is checked. The boxes for
“Individual Retirement Annuity” and “Other” are not checked.
Below the heading “Annuity Plan” appears the words “If IRA:”, and
three choices are given. The choices are “Regular”, “Rollover
IRA”, and “Trustee to Trustee Transfer”. None of the boxes next
to these choices are checked.
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Last modified: May 25, 2011