Dona Elizabeth Conway - Page 3

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          contract with $119,000, retained $10,000 from the $119,000 as a             
          "surrender charge", issued a check in the amount of $109,000 in             
          favor of Equitable, and mailed the check directly to Equitable.             
               Upon receipt of the $109,000 check from Fortis and upon                
          simultaneous receipt of petitioner's application to purchase the            
          Equitable annuity contract, Equitable opened an annuity contract            
          in favor of petitioner with a principal amount invested of                  
          $109,000.  The record does not indicate when payments under the             
          Equitable annuity contract were to begin, but the terms and                 
          provisions of the annuity contracts are treated by the parties as           
          substantially equivalent.                                                   
               On the application form for purchase of the Equitable                  
          annuity contract that petitioner filled out and submitted to                
          representatives of Equitable, petitioner expressly indicated that           
          withdrawal of the funds from the Fortis annuity contract and                
          transfer of the funds to Equitable for purchase of another                  
          annuity contract were to be treated as a section 1035 nontaxable            
               In 1994, Fortis mailed to petitioner and to respondent a               
          Form 1099-R (Distributions From Pensions, Annuities, Retirement             
          or Profit-Sharing Plans, IRA's, Insurance Contracts, etc.)                  
          indicating that the above transaction was taxable and that                  
          $30,535 of the $119,000 withdrawn from petitioner’s Fortis                  
          annuity contract represented taxable income to petitioner.                  

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Last modified: May 25, 2011