- 9 - to Equitable and because she gave up a portion of her Fortis annuity contract solely in exchange for the new Equitable annuity contract, the transaction should qualify as a nontaxable exchange of annuity contracts under section 1035. We agree with petitioner. Neither section 1035 nor the regulations condition nonrecognition treatment upon the exchange of an entire annuity contract. Respondent cites no authority to support respondent's position that nonrecognition treatment under section 1035 is limited to exchanges involving replacement of entire annuity contracts. Neither the statute nor the regulations contain any such requirement, either expressly or by any necessary implication. Petitioner expressly indicated on her application with Equitable that the Equitable annuity contract was being acquired as part of a section 1035 exchange, and Fortis transferred the $109,000 directly to Equitable. No funds were distributed to petitioner. The legislative history under section 1035 states that section 1035 was enacted to provide nonrecognition treatment for taxpayers "who have merely exchanged one * * * [annuity contract] for another better suited to their needs and who have not actually realized gain." H. Rept. 1337, 83d Cong., 2d Sess. 81 (1954). The funds withdrawn from the Fortis annuity contractPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
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