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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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My father had to cash in an annuity and several other

Customer Question

My father had to cash in an annuity and several other investment products in order to purchase his current home while his while his previous home was for sale. How can my father avoid paying income tax on these withdrawals since his home has now sold and he has these funds to reinvest in some sort of product that would give him some tax relief.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

There is NO way to avoid tax liability is income is recognized...

Sorry if you expected differently.

You father might want to take a private mortgage on the new home and pay it back within a short period after the old home is sold.
He still may use a partial distribution form an annuity - but that distribution would be taxable.

.

The annuity payments that you receive are fully taxable if you have no investment in the contract.

If you contributed after-tax dollars to your annuity, your payments are partially taxable. You will not pay tax on the part of the payment that represents a return of the after-tax amount you paid. This amount is your investment in the contract.

In additional - if If your father receives annuity payments before age 59 1/2, he may be subject to an additional 10% tax on early distributions, unless the distribution qualifies for an exception.

There is no way to avid tax on distribution.