Your client was the beneficiary of an annuity contract purchased by her sepmother. When the stepmother died, the insurance company paid the client $400,000 and sent her a Form 1099 indicating that taxable portion was $50,000. However, according tothe client, her father fraudelenty convinced her that he was the intended beneficiary. She gave her father a check equal to the amount she had received form the insurance company. She did not report any of the anuuity proceeds in her income tax return. She later discovered the fraud and filed a lawsuit to collect from her father. The IRS has examined your client's return and has taken the position that she must include the $50,000 in her gross income. Evaluate the IRS's position.