Dona Elizabeth Conway - Page 10

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          (net of the $10,000 surrender fee) were transferred directly into           
          another annuity contract without petitioner having any personal             
          use thereof.                                                                
               In Greene v. Commissioner, 85 T.C. 1024 (1985), an insurance           
          company distributed to the taxpayer all funds invested in an                
          annuity contract qualified under section 403(b).2  Upon receipt,            
          the taxpayer endorsed the check over to another insurance company           
          to purchase another annuity contract qualifying under section               
          403(b).  In Greene, 85 T.C. at 1028, we concluded that the                  
          exchange was nontaxable, and we set forth a broad definition of             
          "exchange" within the meaning of section 1035, as follows:                  

               We are satisfied, however, that Congress intended the                  
               use of the word [exchange] in the broader sense, as                    
               where the taxpayer gives up an insurance contract with                 
               one company, in order to procure the same or a                         
               comparable contract from another company.  Viewed from                 
               the standpoint of the insured taxpayer, he has simply                  
               "exchanged" one policy for another just like it, albeit                
               with two different companies. * * *                                    

               Petitioner herein exchanged a portion of her annuity                   
          contract with Fortis to acquire another annuity contract with               
          Equitable.  Petitioner is in essentially the same position after            
          the exchange as she was in before the exchange, and the same                

          2    Annuity contracts qualifying under sec. 403(b) constitute a            
          form of tax-deferred annuity contracts available to employees of            
          certain tax-exempt organizations.                                           

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