taxation on SPIA
Client has 138k in an annuity. the cost basis is 93k.
if she surrenders the contract and buys a single prem immed annuity, will she get the tax break from the cost basis?
or
would she pay taxes on the entire gain from the surrender?
Thank you,
Douglas
Permalink Submitted by Alan - IRA critic on Wed, 2014-06-11 19:13
If this is done using a 1035 exchange, taxes on the gains will be deferred except for the gains included in each annuity payment. There is also an annuity exception to the 10% penalty as long as the SPIA is not for a period less than life expectancy. http://www.immediateannuities.com/1035-annuity-exchanges/