Originally Posted by DebER
That would be my understanding, but of course I'm no expert. Since I took a lump sum distribution on my father's annuity it put me in a higher tax bracket.
Nobody has mentioned it yet, but if you simply surrender the VA today you'll have a taxable loss.
That would go through this year's tax return and reduce your ordinary taxable income.
If you do a 1035 exchange to another annuity, that will defer taxes until you eventually take money out of that contract.
Googling a little, there seems to be an uncertainty about where to report the loss on the 1040. It could be a "Miscellaneous loss" in the itemized deductions, or it could be an investment loss (but not subject to capital gains treatment). The first seems "safer", but the second avoids a 2% exclusion.
I have no knowledge of your current or future tax situation, but it is something to think about.