Dividends retained by the insurer as a premium, or other consideration for the contract, are not included in income.2 Dividends paid but left with the insurer to accumulate at interest would not be considered retained as premium or consideration.
If any investment has been made after August 13, 1982 in an annuity contract entered into before August 14, 1982, dividends allocable to that investment are includable as dividends on a contract entered into after August 13, 1982.3 Dividends received under an annuity contract with income allocable to earnings on pre-August 14, 1982, and post-August 13, 1982, investments are allocable first to investments made prior to August 14, 1982, then to income accumulated with respect to such pre-August 14, 1982 investments, then to income accumulated with respect to investments made after August 13, 1982, and finally to investments made after August 13, 1982.4
Dividends received after the annuity starting date ( Q 536) are included in gross income regardless of when the contract was entered into or when any investment was made.5