On your Form 1099-R does BOX 7 have the entry "6" meaning a tax-free exchange of one of 3 types of insurance or annuity?
The three examples of a 1035 exchange:
- Annuity to Annuity
- Life Insurance to Life Insurance
- Life Insurance Cash Value to Annuity
If so, entering that "6" as you report the Form 1099-R should result in no taxable amount.
Section 1035 exchange. A tax-free section 1035 exchange is the exchange of (a) a life insurance contract for
another life insurance contract, or for an endowment or annuity contract, or for a qualified long-term care insurance
contract; or (b) a contract of endowment insurance for another contract of endowment insurance that provides for
regular payments to begin no later than they would have begun under the old contract, or for an annuity contract, or for
a qualified long-term care insurance contract; or (c) an annuity contract for an annuity contract or for a qualified
long-term care insurance contract; or (d) a qualified long-term care insurance contract for a qualified long-term
care insurance contract. A contract shall not fail to be treated as an annuity contract or as a life insurance contract solely
because a qualified long-term care insurance contract is a part of or a rider on such contract. However, the distribution
of other property or the cancellation of a contract loan at the time of the exchange may be taxable and reportable on a
separate Form 1099-R. These exchanges of contracts are generally reportable on Form 1099-R.
However, reporting on Form 1099-R is not required if (a) the exchange occurs within the same
company; (b) the exchange is solely a contract for contract exchange, as defined above, that does not result in a
designated distribution; and (c) the company maintains adequate records of the policyholder's basis in the contracts.
For example, a life insurance contract issued by Company X received in exchange solely for another life insurance
contract previously issued by Company X does not have to be reported on Form 1099-R as long as the company
maintains the required records.
Regulations under section 6050Y provide that a section 1035 exchange constitutes a reportable policy sale in limited
circumstances. Death benefits paid by reason of the death of the insured under the life insurance contract issued in such
circumstances are reportable death benefits that must be reported on Form 1099-R.
If this posted response is useful to you, please click on the upraised hand in the lower left of this post. Thank you. Scruffy Curmudgeon--PFFM/ IAFF, retired FireFighter/Paramedic - Locals 718/30, Veteran USAR O3 AIS/ASA '65-'67
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USAR 64-67 AIS/ASA MOS 9301 - O3
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