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1035 inherited exchange

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!

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1 Best answer

Accepted Solutions
dmertz
Level 15

1035 inherited exchange

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.

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2 Replies
dmertz
Level 15

1035 inherited exchange

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.

1035 inherited exchange

Thank you for that information, I appreciate your help.

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