annuity transfer penalty

[Wendy]

I have a client who transferred money from one American Scandia annuity to another in 2005 with no taxable situation. AS sent 1099 as 0 taxable. Almost immediately after transfer, money was withdrawn and deposited to Hartford annuity. This was NOT an IRA.

She now has penalty & interest CP2000 as she received a corrected 1099 showing taxable income. IRS agent told her that there was no tax if it was deposited to another annuity, and to include a letter and proof that it was. I cannot find any kind of confirmation that this would be true, but may be missing something.

Is there any way to avoid tax on this situation?

Thanks.

Wendy

[kcjenkins]

I doubt it. Although she might consider suing the adviser who messed her up.