Non-qualified annuity losses

When selling a non-qualified annuity at a loss, does the IRS allow the owner fo the annuity to take a loss against ordinary income?



The loss can be itemized as a misc itemized deduction subject to 2% of AGI limit. Each annuity is considered separately, but the 2% limit applies to all misc itemized deductions in the aggregate subject to the limit.

The deduction for IRA losses require closing all IRA accounts of the same type. The AMT may impair the value of this deduction.

There have been some very aggressive theories advanced attempting to justify taking these losses on lines 15, 16, or 21 of Form 1040 as ordinary losses reducing AGI. However, the IRS is likely to reject this approach.



By “selling” the annuity, did you mean surrender, or was someone going to buy it?



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