spousal continuance then to 1035 transfer
have client who passed away with an annuity account just in her name not the husband.
It is a NQ account, and the taxable gains are 8k.
a. if the husband takes the spousal continuance, he has no taxable gains to report.
b. but if he does the spousal continuance now and a 1035 exchange to another annuity later, will he get taxed on the 8k of gains?
Thank you,
Douglas
Permalink Submitted by Alan - IRA critic on Tue, 2022-05-10 15:17
No. With spousal continuance he is already treated as the owner prior to the exchange, but even if he was treated as the beneficiary a 1035 exchange can be done according to a 2013 IRS PLR. There will generally be a 1099R issued unless the exchange is with the same insurer.
Permalink Submitted by Douglas Bauerband on Tue, 2022-05-10 18:57
If the spouse does the spousal continuance he loses the death benefit.So if he does a 1035 exchange (with the death benefit) from company A (his late wifes) to company B under his name, he will get a 1099 but no tax on the gains, correct?Thank you,Douglas
Permalink Submitted by Alan - IRA critic on Tue, 2022-05-10 21:45
Yes, providing both insurers cooperate with the 1035 and it is completed. There would still be a 1099R issued with Code 6 indicating a non taxable transfer.
Permalink Submitted by Douglas Bauerband on Wed, 2022-05-11 18:33
she had two annuity contracts. Is it okay to 1035 both of them from different companies into one company under his name or are their any limits on 1035 exchanges?Thank youDougYou have been a great help on this.
Permalink Submitted by Alan - IRA critic on Wed, 2022-05-11 22:26
There are no limits to the number of 1035s. Both can be transferred into one annuity if the companies agree.