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Posted by parrisbraeside@yahoo.ca on March 19, 2007, 2:04 am
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mek...@gmail.com wrote:
> 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.
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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