A 1035 exchange is related to real property
exchanges of investment property, such as selling one apartment building in exchange for another apartment building. It does not apply to investments such as stocks, bonds or annuities.
The situation you are describing would be classified as a rollover.
There are two types of rollovers -- direct and indirect. With a direct rollover, you would fill out a form
with the new investment firm that you wish to transfer the annuity to, and authorize them to collect the funds from the investment firm who now holds the annuity. The money would then be send directly from the current firm to the new firm.
With an indirect rollover you withdraw the money yourself from the firm who currently holds it, and then you have 60 days time in which to reinvest it with the new firm in another annuity investment.
If you choose the direct rollover method, then no reporting
needs to be done to the IRS
. If you choose the indirect rollover method, then the firm who currently holds the investment will send you a 1099-R
form to show the amount you withdrew. You will report that as pensions
received on your tax return
, but as long as you rolled it over within 60 days, you will show the taxable portion of that distribution to be zero.
If you make the indirect rollover, when you reinvest the funds, be sure to tell the company you are investing with that these are rollover funds so they can report it properly to the IRS and they will have a record of the day you reinvested the money.
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Thank you JJ.