Life · Chapter 9 · Annuity Taxation
1035 Exchanges & Annuities
Definition
Tax-free exchanges under IRC §1035: annuity → annuity ✓, life insurance → annuity ✓, but annuity → life insurance ✗ (NEVER tax-free). The owner must receive no money; cost basis carries over — taxes are postponed, not avoided.
Exam tip
Downhill only: life → annuity works, annuity → life doesn't. Memorize the one-way street.
Related terms