Federal Tax Considerations for Life Insurance and Annuities
Why is a direct trustee-to-trustee transfer usually preferred to a sixty day rollover?
Answer and explanation
Answer: B. Moving the money between trustees keeps it out of the participant's hands, so no twenty per cent withholding applies and there is no sixty day clock to miss. The receiving plan must still accept the transfer, and the tax deferral is continued rather than ended.Source: 26 U.S.C. § 402 — 26 U.S.C. § 402(c)
More federal tax considerations for life insurance and annuities questions
- A policy with a large outstanding loan lapses while gain remains in the contract. What is the tax consequence of the policy loans?
- An owner surrenders a policy whose cash value increases have brought it to forty thousand dollars, having paid thirty thousand in premiums. What is the tax result?
- How are amounts received by a beneficiary by reason of the insured's death generally treated for income tax?
- How are increases in the cash value of a life insurance policy treated while the policy stays in force?
- How are policy loans from a life insurance contract that is not a modified endowment contract generally treated for income tax?
- How does classification as a modified endowment contract change the taxation of cash value increases taken out?
621 New York questions like this one.
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