1099-R Code C: Reportable Death Benefits
A death benefit from a policy that had been sold or transferred; special reporting applies.
What the IRS instructions say
Is it taxable, and does the 10 percent penalty apply?
Partly taxable, unlike an ordinary tax-free death benefit. Code C flags a reportable death benefit under section 6050Y, which arises after a life insurance policy was sold or transferred in a reportable policy sale, a life settlement. Under the transfer-for-value rules, the portion of the death benefit above what the buyer paid for the policy plus later premiums is taxable ordinary income; the rest is a tax-free return of that investment.
Combinations you might see
Box 7 can carry two codes. With code C, the pairings mean:
- DC: payments that are both from a nonqualified annuity and reportable death benefits
If this code looks wrong
The IRS matches Box 7 against your return, so start with the payer: request a corrected 1099-R, which is the IRS's standing instruction for incorrect forms. No corrected copy by the end of February? The IRS can contact the payer for you, and Form 4852 substitutes as a last resort. Remember that an indirect 60-day rollover is correctly coded 1 or 7, because the payer cannot see the redeposit; direct rollovers should show G or H, as our rollover guide explains before the paperwork ever gets cut.
Sources: IRS Instructions for Forms 1099-R and 5498; IRS Tax Topics 558 (early distributions), 413 (rollovers), and 154 (incorrect forms). Verified July 2026.
General educational information, not tax advice. Your distribution's taxation depends on your facts; consult a qualified tax professional. ClearChoiceRadar is not affiliated with the IRS or any government agency.