We closed out an annuity from company A that originally were purchased with after tax funds. Our intention was to buy a new Annuity with Company B. Company A sent us a check for the full amount of the closed Annuity in two separate checks. We deposited the checks in our savings account and sent two separate bank issued checks for the full amount of the proceeds ( Gross Distribution) from the Company A Annuity to Company B for the new Annuity. We received a 1099R from Company A with a taxable amount (approximately half of the Gross Distribution, Box 1) shown in Box2a.
Since we just transferred all of the Gross Distribution of the Annuity from Company A to a new Annuity with company B and did not use any of the funds for other uses and the time of the transfer of funds from Company A to Company B was within 5 business days there should not be a tax implication. How do we handle this?
