Annuity
Provides Rare Opportunity
To Take
Ordinary, Rather
Than Capital Loss
October 2004
Has
the fluctuating stock market left you with an annuity loss? If so, and
you are thinking of cashing out of the annuity, here are some thoughts
for you.
If
the annuity is worth less at the time of the distribution than its cost
basis, the redemption will result in an ordinary loss. Ordinary losses
are more valuable than capital losses, (which arise, for example, when a
stock is sold for a loss) because ordinary losses are used to offset
ordinary income with no limits.
By
cashing out of the annuity, you should receive an ordinary loss for the
difference between your initial investment and the annuity’s surrender
value.
You
can reinvest that money into a new investment immediately and you do not
have to wait the 30 days like you would with a wash sale.
There are some areas to be concerned with such as a possible surrender
charges or a loss of a death benefit guarantee.
Please call us for more information on how to use your annuity to offset
ordinary income to your best advantage.
Make
sure you consult with a tax advisor before taking any action
regarding this issue.
Return to 2004 Tax Tips
