This post was originally published on this site
Previously, when you sold or transferred your business interest during your lifetime (e.g., at your retirement), use of private annuity funding allowed you to spread any capital gain from your sale over your life expectancy as derived from the mortality tables. However, capital gains resulting from an exchange of property for a private annuity contract made after October 18, 2006 is generally recognized at the time of the exchange and cannot be deferred.
On October 18, 2006, the Treasury and the IRS issued
proposed regulations, which significantly change the tax treatment of private
annuity payments. Generally, under the proposed regulations, capital gains and
losses resulting from an exchange of property for a private annuity contract
made after October 18, 2006 (April 18, 2007 for a limited class of exchanges)
must be recognized at the time of the exchange, and cannot be deferred over the
life of the annuity. These proposed regulations do not apply to payments
received from an annuity that was received as part of an exchange made prior to
October 18, 2006.