That helps :-).
Here are the numbers:
Initial Premium: 123,271 April 2004 (Non-qualified money)--It was 1035 exchanged into a deffered annuity.
Cost basis left 117,108 (123,271 - 6,163)
Surrender Money Received: 105,365 (August 2009)
Loss of 11,743 (117,108 - 105,365).
The 105,365 will go immediately into an immediate annuity (non-qualified). My concern, will I have to pay tax on the 105,365 that we received in surrender charges, or is there a way to not have to pay any tax on this at all until the immediate annuity starts to pay out beyond the cost basis of 105,365. I am wondering if the only way to do this is with the 1035 exchange that should have taken place, but didn't.
I know this is complicated, I will compensate you fairly if you can bring clarity to the issue.