Practice Quiz

Health and Life Insurance

Category - Tax Issues

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A __________ will allow for the direct transfer of money from a non-qualified annuity from one insurance company to another without incurring an IRS penalty or taxation.
  1. 1031 exchange
  2. 1035 exchange
  3. ERISA exchange
  4. TEFRA exchange
Explanation
Answer: B - A 1035 exchange will allow for the direct transfer of money from a non-qualified annuity from one insurance company to another without incurring an IRS penalty. As long as the funds go directly from one company to another, there will be no taxes due. If, however, the annuity owner takes receipt of the funds, then they may incur tax consequences.
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