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Swap financial products of different stripes

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in Small Business Tax,Small Business Tax Deduction Strategies

As you’re probably well aware, you can swap one real estate property for another real estate property without paying any current federal income tax, as long you meet the requirements under Section 1031 of the tax code. Similarly, many people already know that you can use the same technique to swap one life insurance policy tax-free for a comparable policy under Section 1035 of the tax code.

But do you know that this tax law provision may also apply to different types of financial products?

Strategy: Swap a life insurance policy for an annuity if you don’t need the policy and the surrender value is lower than the premiums you’ve paid. Then you can use the loss from the policy to offset taxable gains from the annuity.

Note that this strategy won’t work with term insurance. It only applies to life insurance policies with a cash value like a whole life or universal policy.

Here’s the whole story: If you bought a cash value life ...(register to read more)

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