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Respondent determined that petitioner had $8,786 in
additional pension and annuity income resulting in a deficiency
in the amount of $1,320 in petitioners’ 1998 Federal income tax.
This Court must decide whether petitioners must include in gross
income $8,786 in proceeds from the termination of life insurance
policies.
Some of the facts in this case have been stipulated and are
so found. Petitioners resided in Kingston, Wisconsin, at the
time they filed their petition.
On October 8, 1998, petitioners sent a letter to
Northwestern Mutual Life Insurance Company (Northwestern) to
request the termination of six life insurance policies. Only
five of the six surrendered policies are at issue and all
subsequent references are to the policies in issue.
On October 15, 1998, Northwestern sent a letter to
petitioner which stated that the cancellation of each of the five
life insurance policies would result in taxable gain to
petitioners which Northwestern was required to report to the
Internal Revenue Service. Northwestern’s letter also listed the
estimated taxable gain with respect to each of the five
surrendered life insurance policies.
For the taxable year 1998, Northwestern issued to
petitioners two Forms 1099 which reported gross distributions
totaling $19,241 and taxable distributions totaling $8,786 with
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Last modified: May 25, 2011