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I am a commissioned salesman with a book of business that I own. When I sell that book to retire can I take the money and put in an annuity and not have to pay income tax on the full amount in one year but only as I draw it from my annuity? Also, I have a qualified annuity that I would like to pull money from in order to make a down payment on a house. Can I borrow from the annuity so that I will not have a large tax burden in one year? I'm 71 years old but have not started receiving required payments yet.
ANSWER
Expert Wray Rives's Answer:
The tax will somewhat depend on the terms you reach when you ultimately sell your business. A portion of the sale price may be for the existing book of business and a portion may be for an agreement not to compete. All of it will be taxable when you receive the cash, but may be taxed at capital gains and ordinary income rates depending on how the terms of the sale agreement.
While the proceeds from selling the business will be taxable when you receive the money, it may be possible to put a portion of it into a tax deferred retirement account to at least defer a poriton of the tax.
