Tax treatment of my surrendered annuity
Several years ago I bought a variable annuity based on the advice of my financial advisor. Unfortunately, this did not do well, and a number of years (and a new advisor) later, this annuity was 1035-transferred to a new company for lower expenses and investment options more in line with my other investments.
Since annuities are an expensive product, and not for everyone, my current advisor recommended surrendering the contract, taking the hit on surrender charges, and moving on. I agreed to do so.
Now, I'm trying to file my taxes and have some confusion. Disregarding the non-deductible surrender charges, the actual contract was surrendered at a substantial loss. To me that would seem to be deductible in some fashion. But where?
I've read somewhere that in order to be deductible, the contract must be surrendered to the original company and not involved in a 1035-exchange. To me this does not make sense because I still suffered the same loss regardless of the company at the end.
I have a 1099 from the second company that has my correct proceeds and (much higher) cost basis, but it is unclear how to file. Turbo Tax seems to make it non-taxable income, but does not account for the significant loss.
What am I missing here?
Thanks for any advice.
WallyH