In 1987 at the age of 63 my husband put a one time investment of $50,000 into a variable annuity which had an attached life insurance policy of $150,000 with me, his wife, as beneficiary. The policy was supposed to pay its own premiums from the earned interest which it did until the stock market fall and my husband living past 80 yrs of age. Early in 2009 we were notified by letter that the policy had exhausted itself and had a value of only a little over one hundred dollars and that if we wished to keep the policy in force we would have to pay $5500 every quarter. We could not afford that so we lost the policy. We subsequently sued the insurance company and the agent and received $15,000 a monh ago. My question is can we claim the difference between the $50,000 and $11,000 ($39,000) plus lost interest as a loss and if so would it be claimed in 2009 when it occurred as an amended return or with our 2010 taxes as when we received the settlememt? If it can be claimed what form would I use? Thank you for your assistance.
1 Answer from Attorneys
No -- it ios not tax deductible
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