Dona Elizabeth Conway - Page 2

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               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code in effect for the year in issue, and              
          all Rule references are to the Tax Court Rules of Practice and              
               After settlement of some issues, the primary issue for                 
          decision is whether direct transfer of a portion of funds                   
          invested in an annuity contract into another annuity contract               
          qualifies as a nontaxable exchange under section 1035.                      

                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
               When the petition was filed, petitioner resided in                     
          Minneapolis, Minnesota.                                                     

          Exchange of Portion of Annuity Contract                                     
               In 1992, petitioner purchased from Fortis Benefits Insurance           
          Co. (Fortis) an annuity contract for a total purchase price of              
          $195,643 (Fortis annuity contract).  Payments under the Fortis              
          annuity contract would not begin until February 4, 2029.                    
               In 1994, petitioner requested Fortis to withdraw $119,000              
          from the Fortis annuity contract and to issue a check in favor              
          of, and to transfer the funds directly to, Equitable Life                   
          Insurance Co. of Iowa (Equitable) for purchase of a new annuity             
          contract from Equitable (Equitable annuity contract).  Pursuant             
          to petitioner's request, Fortis debited petitioner's annuity                

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Last modified: May 25, 2011