Line 10(g) on 5500 EZ

[Belgarath]

This is one of those stupid questions that annoys the life out of me because I don't think it makes much difference in "real life." Unfortunately, as TPA's we frequently deal with unreality.

A plan owns a deferred annuity. Is the interest treated as interest, and hence reported on 10(g), or is it treated as "unrealized gain" and hence not reported?

It makes no sense to me, in the context of a qualified plan, not to report this as interest. As an aside, if you choose to report it as interest when it really should be "unrealized gain" I can't see the IRS penalizing a client for disclosing it as interest. So the real life side is that I'm not sure it really matters all that much what you do. This issue doesn't arise on the regular 5500 form Schedule i, because you report the gain, whether interest or unrealized.

[WDIK]

The way I look at it, if the change in the value of an annuity is due to the fluxuation of an underlying asset (like a stock or mutual fund in a variable annuity), I treat it as an unrealized gain/loss. If the change in value is from additional amounts credited to the annuity, I treat it as income.

I am also annoyed by the inconsistency between the 5500 and 5500-EZ in this regard.