Income Tax Regulations — 306
it on death under the coverage on that policy anniversary exceeds (B) 108% of the amount of the benefit on death under the coverage, on the later of the coverage’s date of issue and the date of the life insurance policy’s preceding policy anniversary (or, if there is no preceding policy anniversary, the coverage’s date of issue), and (iii) on each policy anniversary of the life insurance policy — except to the extent that another exemption test policy has been issued on that date under this subparagraph in respect of a coverage under the life insurance policy — on which (A) the amount by which the fund value benefit under the life insurance policy on that policy anniversary exceeds the fund value benefit under the life insurance policy on the life insurance policy’s preceding policy anniversary (or, if there is no preceding policy anniversary, the date of issue of the policy) exceeds (B) the amount by which (I) 8% of the amount of the benefit on death under the life insurance policy on the life insurance policy’s preceding policy anniversary (or, if there is no preceding policy anniversary, the date of issue of the policy) exceeds (II) the total of all amounts each of which is, in respect of a coverage under the policy, the lesser of 1 the amount by which the amount of the benefit on death under the coverage on that policy anniversary exceeds the amount of the benefit on death under the coverage on the later of the coverage’s date of issue and the date of the life insurance policy’s preceding policy anniversary (or, if there is no preceding policy anniversary, the coverage’s date of issue), and 2 8% of the amount of the benefit on death under the coverage on the later of the coverage’s date of issue and the date of the life insurance policy’s preceding policy anniversary (or, if there is no preceding policy anniversary, the coverage’s date of issue). (4) For the purpose of determining whether the condition in paragraph (1)(a) is met on a policy anniversary of a life insurance policy, each exemption test policy issued in respect of the life insurance policy, or in respect of a coverage under the life insurance policy, is deemed (a) to have a benefit on death that is uniform throughout the term of the exemption test policy and that, subject to subsection (5), is equal to (i) if the date on which the exemption test policy is issued is determined by subparagraph (3)(a)(i), the amount by which the amount on that policy anniversary of the benefit on death under the life insurance policy exceeds 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 life insurance policy, (ii) if the date on which the exemption test policy is issued is determined by subparagraph (3)(a)(ii), the amount of the excess referred to in that subparagraph on that date in respect of the life insurance policy, (iii) if the date on which the exemption test policy is issued is determined by subparagraph (3)(b)(i), the amount determined by the formula A + B – C where A is the amount on that policy anniversary of the benefit on death under the coverage, B is (A) if the benefit on death under the life insurance policy includes a fund value benefit on that policy anniversary, the portion of the fund value benefit on that policy anniversary that is equal to the lesser of (I) the maximum amount of the fund value benefit that could be payable on that policy anniversary if no other coverage were offered under the life insurance policy and the life insurance policy were an exempt policy, and (II) the amount by which the fund value benefit on that policy anniversary exceeds the total of all amounts each of which is the portion 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 t