mek...[at]gmail.com wrote:

- quote -

This sounds like a Canadian RRSP transfer using Section
60(L) of the Income Tax Act erroneously applied to American
Income Tax Code.

Is that the situation?

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I have a client whose insurance agent believed they were
doing a tax- free transaction in moving funds from her
deceased husbands nonqualified annuity, to annuities in the
surviving spouses names.

The old annuities were cashed and the funds received by my
client were invested in new annuity accounts in the
surviving spouses name within 60 days.

The 1099-R received at the end of the year showed the
annuity gain as fully taxable and even had federal income
tax withheld.

My own research concluded there is no 60 day rollover rule
that pertains to nonqualified annuities.

Also, there appeared to be no way to avoid taxation to a
surviving beneficiary (spouse or otherwise) when the annuity
owner dies before the annuity matures.

One source I talked to indicated if the beneficiary is also
named as the "annuitant" in the account set up, then when
the annuity owner dies, the annuitant slides over to become
the annuity owner and a tax- free 1035 exchange is possible
to other annuities.

Any input is appreciated re # 1, if any way to avoid the
above being taxable to my client, given the cash
distribution and reinvestment within 60 days fact pattern,
and re # 2, if the strategy described re naming the
beneficiary as the "annuitant" to accomplish the future
tax-free exchange after death of the named annuity owner is
at all valid.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >