437. What is an annuity contract?Stevenrcline212015-04-28T17:39:00Z2015-04-28T17:39:00Z12301316Summit Business Media103154314Site Map/Annuities/Nonqualified/General Rules2005-01-18T00:00:00ZTaxFactsDefaultArticleSite Map/Other/Starting Points/Starting Points10001-00-TF1.xml1.00;#1571;#2184;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 1Starting Point – What is an annuity contract and what general rules govern the income taxation of payments received under annuity contracts?1256120000.000000000TaxFactsDefaultArticle2010-01-15T00:47:47ZSBMEDIA\moss-admin437. What is an annuity contract?An annuity contract is a financial instrument where a premium is paid to a company (or in some cases to an individual) in return for a promise to pay a certain amount for either a specific period of time or over a person’s lifetime. There are different variations of this basic form. An immediate annuity contract is one in which regular annuity payments will commence within one year. A deferred annuity contract is one in which the annuity start date (i.e., the date when regular annuity income payments begin) is deferred until the contract’s owner elects to start payments; payments can be deferred for many years, and in today's world many annuity owners simply maintain the contract in deferred status. Nonqualified annuities are annuities that are not held within a “qualified” retirement plan or an IRA (Q 3758).The term “annuity” includes all periodic payments resulting from the systematic liquidation of a principal sum and refers not only to payments for a life or lives, but also to installment payments that do not involve life contingency, such as payments under a “fixed period” or a “fixed amount” settlement option..Treas. Regs. §1.72-1(b), §1.72-2(b). Planning Point: The terms “annuity” and “annuity contract” are often used interchangeably, which can create confusion. Strictly speaking, the former term refers to a stream of income and the latter to a contract which can provide that income. (John L. Olsen, CLU, ChFC, AEP)