Publication 575 - Pension And Annuity Income - 2004 Page 15
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36•
taxable part of any distribution. A defined contribution plan
Distributions under contracts entered into before Au-
is a plan in which you have an individual account. Your
gust 14, 1982, to the extent that they are allocable to
benefits are based only on the amount contributed to the
your investment before August 14, 1982.
account and the income, expenses, etc., allocated to the
If you bought an annuity contract before August 14,
account.
1982, and made investments both before August 14, 1982,
and later, the distributed amounts are allocated to your
Plans that permitted withdrawal of employee
investment or to earnings in the following order.
contributions. If you contributed before 1987 to a pen-
sion plan that, as of May 5, 1986, permitted you to with-
1. The part of your investment that was made before
draw your contributions before your separation from
August 14, 1982. This part of the distribution is tax
service, any distribution before your annuity starting date is
free.
tax free to the extent that it, when added to earlier distribu-
tions received after 1986, does not exceed your cost as of
2. The earnings on the part of your investment that was
December 31, 1986. Apply the allocation described in the
made before August 14, 1982. This part of the distri-
preceding discussion only to any excess distribution.
bution is taxable.
3. The earnings on the part of your investment that was
Distribution Before Annuity Starting Date
made after August 13, 1982. This part of the distribu-
tion is taxable.
From a Nonqualified Plan
4. The part of your investment that was made after
If you receive a nonperiodic distribution before the annuity
August 13, 1982. This part of the distribution is tax
starting date from a plan other than a qualified retirement
free.
plan, it is allocated first to earnings (the taxable part) and
then to the cost of the contract (the tax-free part). This
Distribution of U.S. savings bonds. If you receive U.S.
allocation rule applies, for example, to a commercial annu-
savings bonds in a taxable distribution from a retirement
ity contract you bought directly from the issuer. You include
plan, report the value of the bonds at the time of distribution
in your gross income the smaller of:
as income. The value of the bonds includes accrued inter-
•
The nonperiodic distribution, or
est. When you cash the bonds, your Form 1099-INT will
•
show the total interest accrued, including the part you
The amount by which the cash value of the contract
reported when the bonds were distributed to you. For
(figured without considering any surrender charge)
information on how to adjust your interest income for U.S.
immediately before you receive the distribution ex-
savings bond interest you previously reported, see How To
ceeds your investment in the contract at that time.
Report Interest Income in chapter 1 of Publication 550,
Investment Income and Expenses.
Example. You bought an annuity from an insurance
company. Before the annuity starting date under your
Loans Treated as Distributions
annuity contract, you received a $7,000 distribution. At the
time of the distribution, the annuity had a cash value of
If you borrow money from your retirement plan, you must
$16,000 and your investment in the contract was $10,000.
treat the loan as a nonperiodic distribution from the plan
The distribution is allocated first to earnings, so you must
unless it qualifies for the exception explained below. This
include $6,000 ($16,000 − $10,000) in your gross income.
treatment also applies to any loan under a contract pur-
The remaining $1,000 is a tax-free return of part of your
chased under your retirement plan, and to the value of any
investment.
part of your interest in the plan or contract that you pledge
or assign (or agree to pledge or assign). It applies to loans
Exception to allocation rule. Certain nonperiodic distri-
from both qualified and nonqualified plans, including com-
butions received before the annuity starting date are not
mercial annuity contracts you purchase directly from the
subject to the allocation rule in the preceding discussion.
issuer. Further, it applies if you renegotiate, extend, renew,
Instead, you include the amount of the payment in gross
or revise a loan that qualified for the exception below if the
income only to the extent that it exceeds the cost of the
altered loan does not qualify. In that situation, you must
contract.
treat the outstanding balance of the loan as a distribution
This exception applies to the following distributions.
on the date of the transaction.
•
You determine how much of the loan is taxable using
Distributions in full discharge of a contract that you
the allocation rules for nonperiodic distributions discussed
receive as a refund of what you paid for the contract
under Figuring the Taxable Amount, earlier. The taxable
or for the complete surrender, redemption, or matur-
part may be subject to the additional tax on early distribu-
ity of the contract.
tions. It is not an eligible rollover distribution and does not
•
Distributions from life insurance or endowment con-
qualify for the 10-year tax option.
tracts (other than modified endowment contracts, as
defined in section 7702A of the Internal Revenue
Exception for qualified plan, 403(b) plan, and govern-
Code) that are not received as an annuity under the
ment plan loans. At least part of certain loans under a
contracts.
qualified employee plan, qualified employee annuity,
Page 15
ADVERTISEMENT
0 votes
Related Articles
Related forms
Form Nj-500-m - Return Of Gross Tax Withheld Form Salaries And Wages, Pension And Annuity Income And Gambling Winnings - 1996
Financial
Worksheet Iii And Iv- Qualified Capital Gain Exclusion And Partial Pension And Annuity Income Exemption
Financial
Form Nj-w4-p - Certificate Of Voluntary Withholding Of New Jersey Gross Income Tax From Pension And Annuity Payments - 1996
Financial
Form Nj-w-4p - Certificate Of Voluntary Withholding Of New Jersey Gross Income Tax From Pension And Annuity Payments
Financial
Form Nj-w-4p - Certificate Of Voluntary Withholding Of New Jersey Gross Income Tax From Pension And Annuity Payments
Financial
Related Categories
Parent category: Financial