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Old 07-26-2010, 01:23 PM
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Taxes on Annuity Purchase Payment

I'm looking into selling a portion of my structured annuity. The current payment from the insurance company is tax-free. If I sell a portion and receive a lump sum payment, what taxes, if any, are my responsibilty when I complete my 2010 income taxes?



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Old 10-30-2010, 01:15 PM
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"If I sell a portion and receive a lump sum payment, what taxes, if any, are my responsibilty when I complete my 2010 income taxes?"---->According to current tax laws, any gains you incur as a result of selling your annuity are subject to ordinary income tax at your marginal tax rate. Also, if the sale of your annuity occurs prior to reaching age 59 ½, any gains may be subject to a 10% federal tax penalty. So, the tax consequences of your decision to sell your annuity depend on your individual tax situation,
So to speak, this is a usual structured settlement which is designed to give major tax advantages to injured plaintiff.Relatively, there can be major tax consequences connected with the part of the settlement.
There is a strong possibility that a lump sum acquired through the settlement sale will be taxed as ordinary gain, not long term capital gain that is subject to low tax rates.



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