Tax TreatmentQuestion 225 of 315
Which of the following transactions is NOT permitted as a tax-free exchange under IRC §1035?
a.Life insurance policy exchanged for a qualified long-term care contract
b.Annuity contract exchanged for a life insurance policy
c.Life insurance policy exchanged for an annuity contract
d.Annuity contract exchanged for another annuity contract
Explanation
Section 1035 permits life-to-life, life-to-annuity, annuity-to-annuity, and (since the PPA of 2006) either contract into qualified LTC. Annuity-to-life is the one direction that is NOT allowed, because it would convert tax-deferred annuity gain into income-tax-free death proceeds.
Law Reference: IRC §1035(a)Practice all 315 questions free — no signup required.
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Sen Lin, PrepPass Founder · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)