Final answer:
Variable annuities can be exchanged for mutual funds and ETFs without tax consequences. Option B is correct.
Step-by-step explanation:
Variable annuities can be exchanged for mutual funds and ETFs (exchange-traded funds) without tax consequences. This is facilitated through a provision in the tax code known as a 1035 exchange. This type of exchange, named after the relevant section of the Internal Revenue Code, allows a contract owner to exchange one annuity for another without triggering an immediate tax liability.
It's important to note that this provision is specific to annuities, and exchanging an annuity for other investment options like stocks, bonds, gold, real estate, cash, or art would generally be a taxable event. Also, when considering a 1035 exchange, it is crucial to look at factors such as surrender charges on the old annuity, and fees and investment options in the new annuity.