I've got a client that in 2009 transferred ownership of a non- qualified fixed annuity from herself to an irrevocable trust (of which she is the grantor but not the trustee). The beneficiaries of the trust are all natural persons. This was done without my knowledge or input.
This January, the insurance (annuity) company issued a 1099-R for the earnings in the annuity no different than had she actually surrendered the investment outright. I can't seem to find a definitive online as to whether the situation was handled properly (tax-wise), but most seem to think that it was. Can someone please point me towards the actual IRS regs regarding the taxation of annuities upon ownership transfer? I'm looking for the highest, most authoritative source out there. The closest I found was IRC Section 72(u), which deals with taxation of annuities BASED on ownership, but it doesn't actually address TRANSFERS of ownership.
Thanks for the help