1035 exchange

Sherill

Member

Join Date: Feb 2006

Posts: 39
#1

1035 exchange

03-08-2007, 07:47 AM

Client has a life insurance policy for $50K.
Cash value of 17K. Took out a loan for 12K three yrs ago and, now owes $8K.(Has 9K cash surrender value).
Wants to do a 1035 exchange into an annuity with an investment company (to delete the loan).
Would the remainder of $1K be a tax gain to my client or hopefully be part of the 1035 exchange for 2007? Therefore, not be a taxable gain?.

E-gads, thanks for Taxbook! : O)
Tags: None
JG EA

Senior Member

Join Date: Jul 2005

Posts: 2176
#2

03-09-2007, 02:45 AM

Pub 544 page 16 says no gain or loss is recognized if you make any of the following exchanges
A life insurance contract for another or for an endowment or annuity contract......
If you realize a gain on the transfer - it must be recognized.

JG
Comment

Announcement