USA Non-Qualified Variable Annuity and Roth IRA

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I have a quick question. Can't find it any info on IRS.

A person owns a non-qualified variable annuity for over 10 years. It lost money down to $1700- all fees deducted. The owner decided to close the account to avoid losing all the money. The Annuity company did not submit 1099R to IRS as it is part of the principal and no earnings gained, According to them the withdrawal is non-reportable to IRS.

The person who owned owned the annuity decided to have the money sent to his ROTH IRA, but the ROTH IRA people considered it as a contribution. So how is this situation need to be treated as the money is not part of the income for that year?
 

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