Common use of Taxation of Distributions Clause in Contracts

Taxation of Distributions. Except to the extent attributable to nondeductible IRA contributions, distributions from your IRA (that are not rolled over) are taxed as ordinary income and are not eligible for capital gains treatment. If you make nondeductible IRA contributions, a portion of your distributions from the IRA will be nontaxable (as return of your nondeductible contributions) and a portion will be taxable (as a return of deductible contributions, if any, and account earnings). The following formula is used to determine the nontaxable portion of your distribution for a taxable year. Aggregate nondeductible contributions ÷ Year-end account balance x Distribution amount = Nontaxable portion of the distribution To figure the year-end total IRA balance, you treat all of your IRAs as a single IRA. This includes all Traditional IRAs, as well as SEP and Rollover IRAs. You must also add back the distributions taken during the year in calculating your year-end total IRA balance.

Taxation of Distributions. Except to the extent attributable to nondeductible IRA contributions, distributions from your IRA (that are not rolled over) are taxed as ordinary income and are not eligible for capital gains treatmenttreatment or lump-sum income averaging. If you make nondeductible IRA contributions, a portion of your distributions from the IRA will be nontaxable (as return of your nondeductible contributions) and a portion will be taxable (as a return of deductible contributions, if any, and account earnings). The following formula is used to determine the nontaxable portion of your distribution for a taxable year. Aggregate nondeductible contributions ÷ Year-end account balance x Distribution amount = Nontaxable portion of the distribution To figure the year-end total IRA balance, you treat all of your IRAs as a single IRA. This includes all Traditional IRAs, as well as SEP SEP, SIMPLE and Rollover IRAs. You must also add back the distributions taken during the year in calculating your year-end total IRA balance.. For assistance in determining the nontaxable portion, consult your tax advisor, instructions to IRS Forms 1040 and 8606, and IRS Publication 590-B.