Annuity 1035 Exchanges

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From time to time, you may consider exchanging (trading) your annuity for another annuity. Exchanging your annuity means that you replace your annuity with an annuity issued by the same company or a different one. You may want to exchange your annuity, for instance, if your present company becomes insolvent or if you can obtain a better interest rate on another annuity. The rules governing the taxation of annuity and life insurance contract exchanges are spelled out in Internal Revenue Code (IRC) Section 1035. In general, under IRC Section 1035, you can exchange one annuity for another without the immediate recognition of any gain or loss. However, to obtain this favorable tax treatment, the exchange must satisfy the requirements for a Section 1035 exchange.

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