SIE practice questionhardVariable Annuities — 1035 Exchange
A Section 1035 exchange allows an annuity owner to:
- AExchange one annuity contract for another without triggering a taxable event✓ Correct answer
- BWithdraw funds tax-free at any time
- CConvert an annuity into a traditional IRA tax-free
- DReceive a tax deduction for annuity contributions
Explanation
Why A — Exchange one annuity contract for another without triggering a taxable event
A Section 1035 exchange permits a tax-free exchange of one insurance product for a similar product (e.g., annuity to annuity, life insurance to annuity). No taxable gain is triggered. However, surrender charges on the old contract may still apply. A 1035 exchange cannot convert an annuity to an IRA (C). This provision encourages appropriate product changes without tax penalties.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Investment Companies & Packaged Products questions
- A Section 529 plan is a tax-advantaged savings plan designed to:
- Under FINRA rules, the maximum sales charge for a mutual fund is:
- Contributions to a 529 plan are made with:
- When a mutual fund investor elects automatic reinvestment of dividends and capital gains distributions:
- A grandparent wants to contribute to a grandchild's 529 plan. Under the special gift tax provision, the grandparent can…
- Mortality and expense (M&E) risk charges in a variable annuity compensate the insurance company for:
- Who maintains control over a 529 plan account?
- When a UIT reaches its termination date, what happens to unitholders?