Your original assumption that the distribution of the $25,000 was nontaxable is incorrect. This distribution came first from income on the contract (investment gains), so with only $31,130 of investment in the contract (cost basis) and $40,493 remaining balance in the contract, the entire $25,000 came from taxable earnings, correctly reported on the code-7D Form 1099-R (and this is from the tax code, section 72(e)).
Because none of the investment in the contract was included in the $25,000 distribution, the 1035 exchange should have moved to the new contract all $31,130 of your investment in the original contract, so I think that the $6,130 in box 5 of the code-6 Form 1099-R is incorrect and should be $31,130. This doesn't affect your tax return since the entire 1035 exchange is nontaxable, but it could mean that your new contract shows an incorrect investment in the contract. You'll want to investigate that with the insurance company(s). It's certainly incorrect that $25,000 of your investment in the contract simply vanishes.
