A life insurance policy was cash surrendered and 1035 exchange made to another company to buy a SPIA. The cost basis was 125k and the cash surrendered amount is 100k. In this scenario, the cost basis is more than the amount received by the new company. The new company carries over the cost basis from the old company ase it is a 1035 exchange. The SPIA is for 5 years with payments of 2000 /month.

What will be the exclusion ratio in this case?

Will there be no taxable earnings since the total payments are less than cost basis? Please clarify.