Income Tax Regulations — 306
tion of the fund value benefit allocated to other coverages under the life insurance policy, and (B) in any other case, nil, and C is the total of all amounts each of which is the amount, if any, on that policy anniversary of the benefit on death under another exemption test policy issued on or before that policy anniversary in respect of the coverage, (iv) if the date on which the exemption test policy is issued is determined by subparagraph (3)(b)(ii), the amount of the excess referred to in that subparagraph on that date in respect of the coverage, and (v) if the date on which the exemption test policy is issued is determined by subparagraph (3)(b)(iii), the lesser of (A) the amount by which the amount determined under clause (3)(b)(iii)(A) exceeds the amount determined under clause (3)(b)(iii)(B) on that date in respect of the coverage, and (B) the amount determined in respect of the coverage under subclause (A)(I) of the description of B in subparagraph (iii) on that date; and (b) to pay the amount of its benefit on death on the earlier of (i) if the life insurance policy (A) is issued before 2017, the date of death of the individual whose life is insured under the life insurance policy, or (B) is issued after 2016, (I) if two or more lives are jointly insured under the coverage, the date at which the benefit would be payable as a result of the death of any of the lives, and (II) in any other case, the date of death of the individual whose life is insured under the coverage, and (ii) the exemption test policy’s endowment date. (5) For the purpose of determining the amount of a benefit on death under an exemption test policy, (a) if the exemption test policy is issued in respect of a life insurance policy issued before 2017 and at any time the amount of a benefit on death under the life insurance policy is reduced, a particular amount that is equal to the reduction is to be applied at that time to reduce the amount of the benefit on death under each exemption test policy issued before that time in respect of the life insurance policy (other than the exemption test policy the date of issue of which is determined under subparagraph (3)(a)(i)) in the order in which the dates of their issuance are proximate to that time, by an amount equal to the lesser of (i) the portion, if any, of the particular amount not applied to reduce the benefit on death under one or more other such exemption test policies, and (ii) the amount, immediately before that time, of the benefit on death under the relevant exemption test policy; and (b) if the exemption test policy is issued in respect of a coverage under a life insurance policy issued after 2016 and at any time there is a particular reduction in the amount of a benefit on death under the coverage, or the portion, if any, of the fund value benefit referred to in clause (A) of the description of B in subparagraph (4)(a)(iii) in respect of the coverage, the amount of the benefit on death under each exemption test policy issued before that time in respect of the coverage (other than the exemption test policy the date of issue of which is determined under subparagraph (3)(b)(i)) is reduced at that time by an amount equal to the least of (i) the particular reduction, (ii) the amount, immediately before that time, of the benefit on death under the relevant exemption test policy, and (iii) the portion, if any, of the particular reduction not applied to reduce the benefit on death under one or more other such exemption test policies issued on or after the date of issue of the relevant exemption test policy. (6) Subsection (7) applies at any time in respect of a life insurance policy if (a) that time is on its tenth or a later policy anniversary; (b) the accumulating fund (computed without regard to any amount payable in respect of a policy loan) in respect of the policy at that time exceeds 250% of (i) in the case where the particular time at which the policy is issued is determined under subsectio