TurboTax

File with experts
File your taxes
Experts at your fingertips

An expert helps with your taxes, or does them for you
TurboTax Expert Full Service

TurboTax Expert Assist

TurboTax Self-Employed
Prior year taxes
File myself
File myself
Do it yourself

We'll guide you step-by-step
TurboTax Do It Yourself

TurboTax Self-Employed

TurboTax Desktop
TurboTax Free

Activate your product

Prior year taxes
Business
Business
Business taxes

Get your T2 corporate return done right, your way
TurboTax Business

TurboTax Business Desktop
Tax situations
Tax situations
Tax situations

Find extra guidance for your big life moves
For investors

For 25 and younger

For self-employed

For new to Canada

For life changes
Resources
Resources
Resources

Explore tax tools, get tips, and read reviews
Personal income tax calculator

RRSP savings calculator

Learning hub

TurboTax support (FAQ)

TurboTax community
Pricing

Level 2

Solved

1035 inherited exchange

Forum|Forum|3 years ago
May 23, 2023
1 reply
0 views

I inherited an annuity when my mother died. I moved it into another annuity, with a different company, via a 1035 Inherited Exchange. I understood this to be a non-taxable event. I recieved a 1099R with a taxable amount. The box 7 distribution code on the 1099R is 4D. Shouldn't it be distribution code 6? The issuing company will not send me a corrected 1099R. How do I correct this?

Thanks for any advice!

Not A Product Question

Best answer by dmertz

The original company's refusal to change the code to code 6 code indicates that they believe that they did not do a 1035 exchange. Whether or not the original company would permit a 1035 exchange by a beneficiary is determined by the terms of the annuity agreement.

If this truly qualified as a 1035 exchange as permitted under the terms of the annuity agreement, your only recourse would be to submit a substitute Form 1099-R (Form 4852) claiming code 6 and a $0 taxable amount. Whether or not the IRS would accept the explanation is unknown. If the funds were paid to you as intermediary rather than directly to the new annuity for your benefit, it certainly does not qualify as a 1035 exchange.

dmertzAnswer

Level 15

The original company's refusal to change the code to code 6 code indicates that they believe that they did not do a 1035 exchange. Whether or not the original company would permit a 1035 exchange by a beneficiary is determined by the terms of the annuity agreement.

If this truly qualified as a 1035 exchange as permitted under the terms of the annuity agreement, your only recourse would be to submit a substitute Form 1099-R (Form 4852) claiming code 6 and a $0 taxable amount. Whether or not the IRS would accept the explanation is unknown. If the funds were paid to you as intermediary rather than directly to the new annuity for your benefit, it certainly does not qualify as a 1035 exchange.

Level 2

Thank you for that information, I appreciate your help.