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Depending on the exact terms of your agreement with your parents, (dare I hope that it's in writing?) I think it sounds like you have acquired a portfolio of securities from your parents in exchange for a private annuity. (A wonderful estate-planning device that will soon be a thing of the past, under proposed IRS regs.) That is not a gift.

I read your message to understand that they actually gave the 3 of you 3 investment accounts with the proceeds of the farm sale, with the farm sale having been taxed to them, rather than the farm itself.

Your parents are receiving an annual annuity of $21,000. A portion of this is taxable to them. Their basis in the annuity is equal to the basis in the securities, which I would think is about $330,000. The taxable amount depends on their life expectancies, and prevailing interest rates.

You do not get a deduction for the payments you make.

You parents' tax person is smoking dope, to try to characterize it as a retirement account.

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