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A coule of points.

I assume you purchased or contributed to this deferred annuity prior to 1982. Otherwise, the gain on the surrender of the contract would be ordinary income to you, not a capital gain. And if purchased after 1985 and you are not yet 59.5, there will be an additional 10% penalty on the gain.

If 2011 will be a more normalized year for you, then whether you pay quarterly estimated tax will depend on Fed and State tax withholdings by your employer, whether you have your pension or Social Security withhold for Fed/State tax and whether your end of the year underwithholdings would exceed $1,000.

So there are a number of variables that would have to be knownn to be able to speak to your question.

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