The Truth About Personal Finance (Collection)

Truth 19. Tax-free 1035 exchanges

"The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty."

—Winston Churchill

Not nearly as intriguing as Agent 007, but nowhere near as taxing as a Form 1040, is a tax-free 1035 exchange. The tax-free 1035 exchange gets its name from section 1035 of the Internal Revenue Code. Isn't it apt that the tax laws are referred to as being in code since sometimes it seems like you need a special decoder ring to be able to make sense of them? Fortunately, the tax-free 1035 exchange is not particularly complicated, but that does not mean that it is not fraught with potential problems.

At its essence, a tax-free 1035 exchange is the government's permission for you to be ...