Non-Qualified Annuity

[peggysioux]

If an 80 year old taxpayer received a distribution from a non-qualified annuity and purchased a new annuity, could the distribution be considered a roll-over from one annuity to another??

[veritas]

I will take a stab at this

since a 1035 exchange is subject to some of the 1031 rules and your client received the cash directly, I'm going to say no.

[JoshinNC]

A distribution from an NQ Annuity in the annuitization phase is taxable income

If an 80 year old taxpayer received a distribution from a non-qualified annuity and purchased a new annuity, could the distribution be considered a roll-over from one annuity to another??

subject to the exclusion ratio set forth in the contract. A distribution from an NQ annuity in the accumulation phase is taxable income to the extent that the distribution exceeds the basis. Either way there is no "rollover" provision that I am aware of.

[S T]

1035 Exchange

It might meet the 1035 exchange rules for life insurance, nq annuities, etc, if

the owner/annuitant are the same on the old and new contract

contracts must be life insurance, endowment or annuity contracts issued by a life insurance company (so old contract to new contract) like kind exchange, annuities to annuities, life insurance to annuity, BUT an annunity CANNOT be exchanged for a life insurance contract.

If client received the check from the old annuity company and then endorsed to the new annuity company, it might qualify as a 1035 exchange. Greene v. Commissioner 85 TC 1024, but file a disclosure form 8275 (excerpted from another source)

Here is a revenue ruling that I found that might help you http://www.exeterco.com/1031_exchang...g_2002_75.aspx

Sandy

[peggysioux]

1035 Exchange

Client received the check and deposited in his checking account and issued a check to a new company for an annuity. Does that make a difference?

[S T]

Not sure

From what I have read, if the client received the check then applied for the new annuity it will not qualify as a 1035 exchange.

Much the same as a 1031 exchange on property. Can't touch the money!

Google - 1035 exchange and there is a lot of info

Sandy

[veritas]

I used the wrong code section

1034 meant 1035.

[veritas]

That reminds me

Had a client who had an outsatnding loan on his life insurance policy before the exchange. After the exchange to the new policy there was no loan. Guess what taxable income! Just like a 1031 exchange.

He didn't ask me first.