My mother had a fixed annuity she never started drawing on. She initially paid $25k for it decades ago. I was the beneficiary and it has a cash out value of $125k. The guy who sold it to her said the $100k will be long term capital gains. The insurance company sent me a letter with my first elected payment saying that the payout above the purchase price will be ordinary income. This has a huge impact on how I take the payout since I am in the 15% bracket so my understanding is LTCG are not taxed as long as I stay in that bracket. I can also take it over a 5 Year timeframe and keep earning 4%. Can I pay taxes on this as LTCG??