Federal Tax Considerations for Life Insurance and Annuities
Which of these is a permitted exchange under section 1035?
Answer and explanation
Answer: D. Section 1035 lets a life policy be exchanged for life, endowment, annuity or qualified long-term care cover, but an annuity may go only to another annuity or to qualified long-term care cover. The direction of travel is what the section restricts, and it does not run back from an annuity to life insurance.Source: 26 U.S.C. § 1035 — 26 U.S.C. § 1035(a)
More federal tax considerations for life insurance and annuities questions
- Why must a section 1035 exchange be carried out between the two insurers rather than by the owner?
- Within what period must a distribution be rolled over to another qualified plan or individual retirement arrangement to avoid current tax?
- A death benefit is excluded from the beneficiary's income. Does that settle the position for estate tax as well?
- A participant takes an eligible rollover distribution as a cheque rather than by direct transfer. What follows?
- A participating policyowner in good health wants each declared dividend to increase the amount of insurance without new underwriting. Which use fits?
- A participating policyowner wants a declared dividend to reduce the amount due at the next premium date. Which use fits?
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