- 8 - Under regulations promulgated under section 1035, in order for an exchange to qualify for nonrecognition treatment, it is required only that the contracts be of the same type, e.g., an annuity for an annuity and that the obligee under the two contracts be the same person. No other requirements are set forth in the applicable regulations. Section 1.1035-1(c), Income Tax Regs., provides, in part, as follows: Sec. 1.1035-1. Certain exchanges of insurance policies.--Under the provisions of section 1035 no gain or loss is recognized on the exchange of: * * * * * * * (c) An annuity contract for another annuity contract (section 1035(a)(3)), but section 1035 does not apply to such exchanges if the policies exchanged do not relate to the same insured. The exchange, without recognition of gain or loss, of an annuity contract for another annuity contract under section 1035(a)(3) is limited to cases where the same person or persons are the obligee or obligees under the contract received in exchange as under the original contract. * * * Respondent argues that because the entire Fortis annuity contract was not replaced by the Equitable annuity contract, petitioner's withdrawal of $119,000 from the Fortis annuity contract does not qualify as a nontaxable exchange under section 1035 and is taxable to the extent of $30,535, the portion of the withdrawal allocable to income. Petitioner argues that because Fortis did not distribute any funds to her personally but rather transferred the funds directlyPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011