• Member Statistics

    • 863,871 Colleagues-to-Date [Sponsored by a generous R&D grant from iMBA, Inc.]
  • ME-P Information & Content Channels

  • ME-P Archives Silo [2006 – 2021]

  • Ann Miller RN MHA [Managing Editor]

    USNews.com, Reuters.com,
    News Alloy.com,
    and Congress.org

    Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

    Product Details

    Product Details

    Product Details


    New "Self-Directed" Study Option SinceJanuary 1, 2020
  • Most Recent ME-Ps

  • PodiatryPrep.org

    Lower Extremity Trauma
    [Click on Image to Enlarge]

  • ME-P Free Advertising Consultation

    The “Medical Executive-Post” is about connecting doctors, health care executives and modern consulting advisors. It’s about free-enterprise, business, practice, policy, personal financial planning and wealth building capitalism. We have an attitude that’s independent, outspoken, intelligent and so Next-Gen; often edgy, usually controversial. And, our consultants “got fly”, just like U. Read it! Write it! Post it! “Medical Executive-Post”. Call or email us for your FREE advertising and sales consultation TODAY [770.448.0769]

    Product Details

    Product Details

  • Medical & Surgical e-Consent Forms

  • iMBA R&D Services

    Commission a Subject Matter Expert Report [$2500-$9999]January 1, 2020
    Medical Clinic Valuations * Endowment Fund Management * Health Capital Formation * Investment Policy Statement Analysis * Provider Contracting & Negotiations * Marketplace Competition * Revenue Cycle Enhancements; and more! HEALTHCARE FINANCIAL INDUSTRIAL COMPLEX
  • iMBA Inc., OFFICES

    Suite #5901 Wilbanks Drive, Norcross, Georgia, 30092 USA [1.770.448.0769]. Our location is real and we are now virtually enabled to assist new long distance clients and out-of-town colleagues.

  • ME-P Publishing


    If you want the opportunity to work with leading health care industry insiders, innovators and watchers, the “ME-P” may be right for you? We are unbiased and operate at the nexus of theoretical and applied R&D. Collaborate with us and you’ll put your brand in front of a smart & tightly focused demographic; one at the forefront of our emerging healthcare free marketplace of informed and professional “movers and shakers.” Our Ad Rate Card is available upon request [770-448-0769].

  • Reader Comments, Quips, Opinions, News & Updates

  • Start-Up Advice for Businesses, DRs and Entrepreneurs

    ImageProxy “Providing Management, Financial and Business Solutions for Modernity”
  • Up-Trending ME-Ps

  • Capitalism and Free Enterprise Advocacy

    Whether you’re a mature CXO, physician or start-up entrepreneur in need of management, financial, HR or business planning information on free markets and competition, the "Medical Executive-Post” is the online place to meet for Capitalism 2.0 collaboration. Support our online development, and advance our onground research initiatives in free market economics, as we seek to showcase the brightest Next-Gen minds. THE ME-P DISCLAIMER: Posts, comments and opinions do not necessarily represent iMBA, Inc., but become our property after submission. Copyright © 2006 to-date. iMBA, Inc allows colleges, universities, medical and financial professionals and related clinics, hospitals and non-profit healthcare organizations to distribute our proprietary essays, photos, videos, audios and other documents; etc. However, please review copyright and usage information for each individual asset before submission to us, and/or placement on your publication or web site. Attestation references, citations and/or back-links are required. All other assets are property of the individual copyright holder.
  • OIG Fraud Warnings

    Beware of health insurance marketplace scams OIG's Most Wanted Fugitives at oig.hhs.gov

Why Doctors Must Take Care When Swapping Insurance Policies and Annuities

Understanding Section 1035 Treatment of Exchanges

By Dr. David Edward Marcinko MBA CMP™



With the passage of the Tax Equity and Fiscal Responsibility Act, back in 1982 (TEFRA), insurance companies were required to report the payment of all surrender proceeds, forcing physicians and all individuals to be more compliant in reporting gains on the surrender of an old policy. As a result, insureds took advantage of IRC Section 1035 and made tax-free exchanges of insurance, endowment, and annuity contracts. If the exchange is structured properly, gains (and losses) on the surrender of an old policy must be deferred beyond the life of the policyholder.

Section 1035 Treatment

The following types of exchanges qualify for tax-free treatment:

1. A life insurance contract for another life insurance, annuity, or endowment contract

2. An endowment contract for an annuity contract or for another endowment contract in which the payments begin at a date no later than the date that payment would have begun under the original contract

3. An annuity contract for another annuity contract

However, to the extent that money or other property (“boot”) is received by the insured in a 1035 exchange, gain may be recognized to the extent of the “boot.” The new policy received takes the basis of the old contract exchanged, decreased by the value of boot received, and increased by any gain required to be recognized.


Unlike exchanges subject to Section 1031, in which there is a 180-day limit, there is apparently no statutory time limit for completing an exchange under Section 1035. However, be careful in the case of an exchange of immediate annuity contracts in which the annuity starting date must begin no later than one year from the date of the purchase of the annuity. When an exchange has occurred, the holding period of the original contract attaches to the new contract. Therefore, the insured may not have begun to receive the annuity within one year from the date of the annuity’s purchase, and therefore, the 10% premature withdrawal penalty may apply.

Section 403(b) Annuities

The IRS has even allowed tax-free exchange of Section 403(b) annuities provided the new contract’s distribution restrictions are at least as stringent as those of the old contract. And, distributions from financially troubled life insurance companies, if reinvested within 60 days of receipt, can qualify for 1035 treatment. But, in most cases, a doctor or taxpayer should undertake a direct exchange whenever possible.

Note: “Nontaxable Exchanges of Insurance Contracts and Annuities Under Section 1035,” John C. Zimmerman and Tamara K. Kowalczyk, Journal of Taxation of Investments, Summer 1997, pp. 307–315, Warren, Gorham & Lamont, (800) 950-1205.


And so, your thoughts and comments on this ME-P are appreciated. Have you ever made this sort of exchange; successful or not? Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com


DICTIONARIES: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
BLOG: www.MedicalExecutivePost.com
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors

Product DetailsProduct DetailsProduct Details

Product Details  Product Details

   Product Details 

%d bloggers like this: