1099-R for surrender of life insurance policy
When my client cashed out his life insurance policy, he received a letter from the insurance company stating that the Surrender Value was $5,304.84 and the Taxable Gain was $1,930.04. The check he received was for $5,304.84. The 1099-R shows $5,304.84 in box 1, nothing in box 2 and $3,374.80 in box 5 (insurance premiums). When I enter these numbers, the tax return shows the taxable income as $5,305. Shouldn't he be paying tax on just $1,930? Even though the 1099-R shows nothing for the taxable portion in box 2, should I enter $1,930 for box 2?
