Calling a tax professional/financial advisor - quick annuity question

[undercover]

I've did some searching and can't find anything.

My parents have an annuity that rests into an IRA. It's not annuitized, so it's basically just a collection of mutual fund holdings and bonds in an IRA. It's just "labeled" as an annuity, thus they're paying management fees for literally no reason since they don't plan on ever annuitizing.

My question is, shouldn't they be paying long-term capital gains rates on this income rather than it being treated as ordinary income? So far, it's been treated as ordinary income. That would make sense if they were actually receiving a check monthly from the insurance company, but they're not, as they haven't annuitized. They basically just withdraw a set amount monthly and already have the taxes withheld.

Any insight is appreciated. Thanks.

[MDM]

My parents have an annuity that rests into an IRA. It's not annuitized, so it's basically just a collection of mutual fund holdings and bonds in an IRA. It's just "labeled" as an annuity, thus they're paying management fees for literally no reason since they don't plan on ever annuitizing.

Is this a rollover from a 403b?  Do you have the ticker symbol(s)?  What firm holds the account?

My question is, shouldn't they be paying long-term capital gains rates on this income rather than it being treated as ordinary income? So far, it's been treated as ordinary income. That would make sense if they were actually receiving a check monthly from the insurance company, but they're not, as they haven't annuitized. They basically just withdraw a set amount monthly and already have the taxes withheld.

Money that one withdraws from a traditional IRA (and doesn't roll over into another traditional account) is treated as ordinary income.  Doesn't matter what the investments inside the tIRA are.

[undercover]

They were self-employed so they eventually took a lump sum of savings and went with an annuity...and then rolled that annuity into another about 8 years ago. But it sounds like you answered the question, as it is indeed a tIRA. Thanks! Not sure how I didn't catch that.