II 

112TH CONGRESS 

2D SESSION S. 2048 

To amend the Internal Revenue Code of 1986 to clarify the tax treatment 

of certain life insurance contract transactions, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 31, 2012 

Mr. CASEY introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to clarify 

the tax treatment of certain life insurance contract transactions, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. TAX REPORTING FOR LIFE SETTLEMENT 

4 TRANSACTIONS. 

5 (a) IN GENERAL.—Subpart B of part III of sub6 chapter A of chapter 61 of the Internal Revenue Code of 

7 1986 is amended by adding at the end the following new 

8 section: 


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1 ‘‘SEC. 6050X. RETURNS RELATING TO CERTAIN LIFE INSUR2 ANCE CONTRACT TRANSACTIONS. 

3 ‘‘(a) REQUIREMENT OF REPORTING OF CERTAIN

4 PAYMENTS.— 

5 ‘‘(1) IN GENERAL.—Every person who acquires 

6 a life insurance contract or any interest in a life in7 surance contract in a reportable policy sale during 

8 any taxable year shall make a return for such tax9 able year (at such time and in such manner as the 

10 Secretary shall prescribe) setting forth— 

11 ‘‘(A) the name, address, and TIN of such 

12 person, 

13 ‘‘(B) the name, address, and TIN of each 

14 recipient of payment in the reportable policy 

15 sale, 

16 ‘‘(C) the date of such sale, 

17 ‘‘(D) the name of the issuer of the life in18 surance contract sold and the policy number of 

19 such contract, and 

20 ‘‘(E) the amount of each payment. 

21 ‘‘(2) STATEMENT TO BE FURNISHED TO PER22 SONS WITH RESPECT TO WHOM INFORMATION IS RE23 QUIRED.—Every person required to make a return 

24 under this subsection shall furnish to each person 

25 whose name is required to be set forth in such re26 turn a written statement showing— 


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1 ‘‘(A) the name, address, and phone num2 ber of the information contact of the person re3 quired to make such return, and 

4 ‘‘(B) the information required to be shown 

5 on such return with respect to such person, ex6 cept that in the case of an issuer of a life insur7 ance contract, such statement is not required to 

8 include the information specified in paragraph 

9 (1)(E). 

10 ‘‘(b) REQUIREMENT OF REPORTING OF SELLER’S

11 BASIS IN LIFE INSURANCE CONTRACTS.— 

12 ‘‘(1) IN GENERAL.—Upon receipt of the state13 ment required under subsection (a)(2) or upon no14 tice of a transfer of a life insurance contract to a 

15 foreign person, each issuer of a life insurance con16 tract shall make a return (at such time and in such 

17 manner as the Secretary shall prescribe) setting 

18 forth— 

19 ‘‘(A) the name, address, and TIN of the 

20 seller who transfers any interest in such con21 tract in such sale, 

22 ‘‘(B) the investment in the contract (as de23 fined in section 72(e)(6)) with respect to such 

24 seller, and 

25 ‘‘(C) the policy number of such contract. 


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1 ‘‘(2) STATEMENT TO BE FURNISHED TO PER2 SONS WITH RESPECT TO WHOM INFORMATION IS RE3 QUIRED.—Every person required to make a return 

4 under this subsection shall furnish to each person 

5 whose name is required to be set forth in such re6 turn a written statement showing— 

7 ‘‘(A) the name, address, and phone num8 ber of the information contact of the person re9 quired to make such return, and 

10 ‘‘(B) the information required to be shown 

11 on such return with respect to each seller whose 

12 name is required to be set forth in such return. 

13 ‘‘(c) REQUIREMENT OF REPORTING WITH RESPECT

14 TO REPORTABLE DEATH BENEFITS.— 

15 ‘‘(1) IN GENERAL.—Every person who makes a 

16 payment of reportable death benefits during any tax17 able year shall make a return for such taxable year 

18 (at such time and in such manner as the Secretary 

19 shall prescribe) setting forth— 

20 ‘‘(A) the name, address, and TIN of the 

21 person making such payment, 

22 ‘‘(B) the name, address, and TIN of each 

23 recipient of such payment, 

24 ‘‘(C) the date of each such payment, and 

25 ‘‘(D) the amount of each such payment. 


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1 ‘‘(2) STATEMENT TO BE FURNISHED TO PER2 SONS WITH RESPECT TO WHOM INFORMATION IS RE3 QUIRED.—Every person required to make a return 

4 under this subsection shall furnish to each person 

5 whose name is required to be set forth in such re6 turn a written statement showing— 

7 ‘‘(A) the name, address, and phone num8 ber of the information contact of the person re9 quired to make such return, and 

10 ‘‘(B) the information required to be shown 

11 on such return with respect to each recipient of 

12 payment whose name is required to be set forth 

13 in such return. 

14 ‘‘(d) DEFINITIONS.—For purposes of this section: 

15 ‘‘(1) PAYMENT.—The term ‘payment’ means 

16 the amount of cash and the fair market value of any 

17 consideration transferred in a reportable policy sale. 

18 ‘‘(2) REPORTABLE POLICY SALE.—The term 

19 ‘reportable policy sale’ has the meaning given such 

20 term in section 101(a)(3)(B). 

21 ‘‘(3) ISSUER.—The term ‘issuer’ means any life 

22 insurance company that bears the risk with respect 

23 to a life insurance contract on the date any return 

24 or statement is required to be made under this sec25 tion. 


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1 ‘‘(4) REPORTABLE DEATH BENEFITS.—The 

2 term ‘reportable death benefits’ means amounts paid 

3 by reason of the death of the insured under a life 

4 insurance contract that has been transferred in a re5 portable policy sale.’’. 

6 (b) CLERICAL AMENDMENT.—The table of sections 

7 for subpart B of part III of subchapter A of chapter 61 

8 of the Internal Revenue Code of 1986 is amended by in9 serting after the item relating to section 6050W the fol10 lowing new item: 

‘‘Sec. 6050X. Returns relating to certain life insurance contract transactions.’’. 

11 (c) CONFORMING AMENDMENTS.— 

12 (1) Subsection (d) of section 6724 of the Inter13 nal Revenue Code of 1986 is amended— 

14 (A) by striking ‘‘or’’ at the end of clause 

15 (xxiv) of paragraph (1)(B), by striking ‘‘and’’ 

16 at the end of clause (xxv) of such paragraph 

17 and inserting ‘‘or’’, and by inserting after such 

18 clause (xxv) the following new clause: 

19 ‘‘(xxvi) section 6050X (relating to re20 turns relating to certain life insurance con21 tract transactions), and’’, and 

22 (B) by striking ‘‘or’’ at the end of subpara23 graph (GG) of paragraph (2), by striking the 

24 period at the end of subparagraph (HH) of 

25 such paragraph and inserting ‘‘, or’’, and by inVerDate Mar 15 2010 23:42 Feb 01, 2012 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2048.IS S2048

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1 serting after such subparagraph (HH) the fol2 lowing new subparagraph: 

3 ‘‘(II) subsection (a)(2), (b)(2), or (c)(2) of 

4 section 6050X (relating to returns relating to 

5 certain life insurance contract transactions).’’. 

6 (2) Section 6047 of such Code is amended— 

7 (A) by redesignating subsection (g) as sub8 section (h), 

9 (B) by inserting after subsection (f) the 

10 following new subsection: 

11 ‘‘(g) INFORMATION RELATING TO LIFE INSURANCE

12 CONTRACT TRANSACTIONS.—This section shall not apply 

13 to any information which is required to be reported under 

14 section 6050X.’’, and 

15 (C) by adding at the end of subsection (h), 

16 as so redesignated, the following new para17 graph: 

18 ‘‘(4) For provisions requiring reporting of infor19 mation relating to certain life insurance contract 

20 transactions, see section 6050X.’’. 

21 (d) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to— 

23 (1) reportable policy sales after December 31, 

24 2012, and 


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1 (2) reportable death benefits paid after Decem2 ber 31, 2012. 

3 SEC. 2. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE 

4 CONTRACTS. 

5 (a) IN GENERAL.—Paragraph (1) of section 1016(a) 

6 of the Internal Revenue Code of 1986 is amended by strik7 ing subparagraph (A) and all that follows and inserting 

8 the following: 

9 ‘‘(A) for— 

10 ‘‘(i) taxes or other carrying charges 

11 described in section 266; or 

12 ‘‘(ii) expenditures described in section 

13 173 (relating to circulation expenditures), 

14 for which deductions have been taken by the 

15 taxpayer in determining taxable income for the 

16 taxable year or prior taxable years; or 

17 ‘‘(B) for mortality, expense, or other rea18 sonable charges incurred under an annuity or 

19 life insurance contract;’’. 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 this section shall apply to transactions entered into after 

22 August 25, 2009. 


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1 SEC. 3. EXCEPTION TO TRANSFER FOR VALUABLE CONSID2 ERATION RULES. 

3 (a) IN GENERAL.—Subsection (a) of section 101 of 

4 the Internal Revenue Code of 1986 is amended by adding 

5 at the end the following new paragraph: 

6 ‘‘(3) EXCEPTION TO VALUABLE CONSIDERATION

7 RULES FOR COMMERCIAL TRANSFERS.— 

8 ‘‘(A) IN GENERAL.—The second sentence 

9 of paragraph (2) shall not apply in the case of 

10 a transfer of a life insurance contract, or any 

11 interest therein, which is a reportable policy 

12 sale. 

13 ‘‘(B) REPORTABLE POLICY SALE.—For 

14 purposes of this paragraph, the term ‘reportable 

15 policy sale’ means the acquisition of an interest 

16 in a life insurance contract, directly or indi17 rectly, if the acquirer has no substantial family, 

18 business, or financial relationship with the in19 sured apart from the acquirer’s interest in such 

20 life insurance contract. For purposes of the pre21 ceding sentence, the term ‘indirectly’ applies to 

22 the acquisition of an interest in a partnership, 

23 trust, or other entity that holds an interest in 

24 the life insurance contract.’’. 

25 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

26 section 101(a) of the Internal Revenue Code of 1986 is 


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1 amended by striking ‘‘paragraph (2)’’ and inserting ‘‘para2 graphs (2) and (3)’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to transfers after December 31, 

5 2012. 

Æ 


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