Advanced Underwriting Consultants

Question of the Day – July 11

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client wants to take a partial distribution from her nonqualified deferred annuity (NQDA) to meet a short-term liquidity need.  May she replace the money within 60 days and avoid income tax on the distribution?

Answer: No.

The idea of 60 day rollovers applies only to qualified accounts such as an IRA.  If the client wanted to employ the technique described with regard to an IRA, it would be successful so long as withdrawn funds were re-deposited within 60 days.

The only kind of tax-free transfer rules that apply to NQDAs involve the Section 1035 exchange rules.  There is no 60 day rollover provision within Section 1035 or its regulations.  There is no 30 day, 10 day or three day rollover window, either.  In fact, the IRS has consistently taken the position that if the taxpayer handles an annuity distribution at all, for any length of time, it is a taxable distribution.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.