Tax TreatmentQuestion 706 of 716
Which 1035 exchange is NOT permitted on a tax-free basis?
a.Life insurance to another life insurance policy
b.Annuity to a life insurance policy
c.Life insurance to an annuity
d.Annuity to another annuity
Explanation
You may exchange life to life, life to annuity, or annuity to annuity tax-free, but not an annuity into a life insurance policy, because that would move taxable gain into a tax-free death benefit. The permitted directions preserve the tax structure.
This topic, taught in full in the California Life & Health Insurance Producer Exam guide. California Life & Health Insurance Producer Exam — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
Practice all 716 questions free — no signup required.
Own the complete California Life & Health Insurance Producer Exam guide — PDF + EPUB, $19.99 →
Related questions on this topic
- A ten percent federal tax penalty generally applies to taxable withdrawals from annuities and qualified plans taken before the owner reaches age:
- Accelerated death benefits paid to an insured who has been certified as terminally ill are generally:
- A Section 1035 exchange permits a tax-free transfer between:
- The main tax disadvantage of a Modified Endowment Contract (MEC) is that:
- The general rule that life insurance death proceeds are income-tax-free can be lost under the 'transfer-for-value' rule when the policy is:
- When death proceeds are left with the insurer and paid to the beneficiary in installments, the portion that is taxable is the:
Last reviewed: · editorial process
PrepPass team · 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)