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Skirt the new crackdown on private annuities

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Crash! That was the sound of the IRS coming down hard on private annuities. In the form of proposed regulations —NPRM REG – 141901-05 — the IRS wants to eliminate some of the income-tax advantages of selling appreciated property, such as real estate, in exchange for a private annuity.

Advice: All is not lost. For one thing, you can still realize estate-tax benefits with a private annuity. For another, you may be able to squeeze through a narrow window of opportunity for certain transactions.

Old rules: In a landmark ruling issued in the 1960s, the IRS allowed the gain from a private annuity to be taxed ratably over the annuitant’s life expectancy. (IRS Revenue Ruling 69-74) Thus, annuitants could spread the tax out over time. Now, the IRS has completely reversed itself.

New rules: Under the IRS’s proposed rules, if an annuity contract is received for property instead of cash, the amount realized is the annuity cont...(register to read more)

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