If you privately purchased an annuity contract from a commercial organization, such as an insurance company, you generally must use the General
Rule to figure the tax-free part of each annuity payment. For more information about the General Rule, get Publication 939.
Also, see Variable
Annuities in Publication 575
for the special provisions that apply to these annuity contracts.
Sale of annuity.
Gain on the exchange of an annuity contract is ordinary income to the extent that the gain is due to interest accumulated on the contract and the
exchange is for a life insurance or endowment contract. You do not recognize gain or loss on an exchange of an annuity contract solely for another
annuity contract if the insured or annuitant remains the same. See Transfers of Annuity Contracts in Publication 575
for more information
about exchanges of annuity contracts.
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