# Prop. Treas. Reg. § 1.1001-1: Computation of gain or loss.

Proposed regulation, not in force. REG-141901-05, 71 FR 61441, published 2006-10-18 <https://www.federalregister.gov/documents/2006/10/18/E6-17301/exchanges-of-property-for-an-annuity>. Interprets 26 U.S.C. § 1001.

Par. 3. In § 1.1001-1, paragraphs (h), (i) and (j) are added to read as follows:

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(h) [Reserved.]

(i) [Reserved.]

(j) Certain annuity contracts received in exchange for property —(1) In general. If an annuity contract (other than an annuity contract that either is a debt instrument subject to sections 1271 through 1275, or is received from a charitable organization in a bargain sale governed by § 1.1011-2) is received in exchange for property, receipt of the contract shall be treated as a receipt of property in an amount equal to the fair market value of the contract, whether or not the contract is the equivalent of cash. The amount realized attributable to the annuity contract is the fair market value of the annuity contract at the time of the exchange, determined under section 7520. For the timing of the recognition of gain or loss, if any, see § 1.451-1(a). In the case of a transfer in part a sale and in part a gift, see paragraph (e) of this section. In the case of an annuity contract that is a debt instrument subject to sections 1271 through 1275, see paragraph (g) of this section. In the case of a bargain sale to a charitable organization, see § 1.1011-2.

(2) Effective date —(i) In general. Except as provided in paragraph (j)(2)(ii), this paragraph (j) is effective for  exchanges of property for an annuity contract (other than an annuity contract that either is a debt instrument subject to sections 1271 through 1275, or is received from a charitable organization in a bargain sale governed by § 1.1011-2) after October 18, 2006.

(ii) This paragraph (j) is effective for exchanges of property for an annuity contract (other than an annuity contract that either is a debt instrument subject to sections 1271 through 1275, or is received from a charitable organization in a bargain sale governed by § 1.1011-2) after April 18, 2006 if the following conditions are met—

(A) The issuer of the annuity contract is an individual;

(B) The obligations under the annuity contract are not secured, either directly or indirectly; and

(C) The property transferred in exchange for the annuity contract is not subsequently sold or otherwise disposed of by the transferee during the two-year period beginning on the date of the exchange. For purposes of this provision, a disposition includes without limitation a transfer to a trust (whether a grantor trust, a revocable trust, or any other trust) or to any other entity even if solely owned by the transferor.