Question

Which of the following statements is true regarding a section 1035 exchange of life insurance policies?

a. if theo enters into a 1035 exchange of his whole life policy for a variable life policy there will be no tax on the exchange and the cost basis will carry over from the old policy to the new policy.
b. lucas can make a 1035 exchange of a policy on his life for a policy on the life of his spouse.
c. apollo, who has surrendered his universal life policy, can accomplish a 1035 exchange by using the cash surrender value to purchase another life insurance policy within 60 days of surrender.
d. athena can exchange her annuity for a life insurance policy under a sec. 1035 exchange.

Answer 1

The correct statement regarding a section 1035 exchange of life insurance policies is option A. If Theo enters into a 1035 exchange of his whole life policy for a variable life policy, there will be no tax on the exchange, and the cost basis will carry over from the old policy to the new policy.

"The correct option is approximately option A"

Step-by-step explanation:

The correct statement regarding a section 1035 exchange of life insurance policies is option A. If Theo enters into a 1035 exchange of his whole life policy for a variable life policy, there will be no tax on the exchange, and the cost basis will carry over from the old policy to the new policy. A section 1035 exchange allows for the tax-free transfer of the cash value from one life insurance policy to another.

Option B is not true because a section 1035 exchange applies to policies on the same life insured, not on the life of someone else.

Option C is also not true because a section 1035 exchange requires the transfer of the cash value from one life insurance policy to another, not the surrender of a policy to purchase a new one.

Option D is also not true because a section 1035 exchange allows for the tax-free exchange of life insurance policies, not annuity policies.