Source: https://codes.findlaw.com/us/title-26-internal-revenue-code/26-usc-sect-101.html
Timestamp: 2020-02-25 07:10:34
Document Index: 514336363

Matched Legal Cases: ['§ 101', '§ 101', '§ 101', '§ 101', '§\u20021402', '§\u2002421', '§ 101', '§ 101']

26 U.S.C. § 101 - U.S. Code Title 26. Internal Revenue Code § 101 | FindLaw
26 U.S.C. § 101 - U.S. Code - Unannotated Title 26. Internal Revenue Code § 101. Certain death benefits
(a) Proceeds of life insurance contracts payable by reason of death.--
(1) General rule. --Except as otherwise provided in paragraph (2), subsection (d), subsection (f), and subsection (j), gross income does not include amounts received (whether in a single sum or otherwise) under a life insurance contract, if such amounts are paid by reason of the death of the insured.
(2) Transfer for valuable consideration. --In the case of a transfer for a valuable consideration, by assignment or otherwise, of a life insurance contract or any interest therein, the amount excluded from gross income by paragraph (1) shall not exceed an amount equal to the sum of the actual value of such consideration and the premiums and other amounts subsequently paid by the transferee. The preceding sentence shall not apply in the case of such a transfer--
The term “other amounts” in the first sentence of this paragraph includes interest paid or accrued by the transferee on indebtedness with respect to such contract or any interest therein if such interest paid or accrued is not allowable as a deduction by reason of section 264(a)(4) .
[(b) Repealed. Pub.L. 104-188, Title I, § 1402(a), Aug. 20, 1996, 110 Stat. 1789]
(c) Interest. --If any amount excluded from gross income by subsection (a) is held under an agreement to pay interest thereon, the interest payments shall be included in gross income.
(d) Payment of life insurance proceeds at a date later than death.--
(1) General rule. --The amounts held by an insurer with respect to any beneficiary shall be prorated (in accordance with such regulations as may be prescribed by the Secretary) over the period or periods with respect to which such payments are to be made. There shall be excluded from the gross income of such beneficiary in the taxable year received any amount determined by such proration. Gross income includes, to the extent not excluded by the preceding sentence, amounts received under agreements to which this subsection applies.
(2) Amount held by an insurer. --An amount held by an insurer with respect to any beneficiary shall mean an amount to which subsection (a) applies which is--
(3) Application of subsection. --This subsection shall not apply to any amount to which subsection (c) is applicable.
[(e) Repealed. Pub.L. 98-369, Title IV, § 421(b)(2), July 18, 1984, 98 Stat. 794]
(f) Proceeds of flexible premium contracts issued before January 1, 1985 payable by reason of death.--
(1) In general. --Any amount paid by reason of the death of the insured under a flexible premium life insurance contract issued before January 1, 1985 shall be excluded from gross income only if--
(A) under such contract--
(2) Guideline premium limitation. --For purposes of this subsection--
(A) Guideline premium limitation. --The term “guideline premium limitation” means, as of any date, the greater of--
(B) Guideline single premium. --The term “guideline single premium” means the premium at issue with respect to future benefits under the contract (without regard to any qualified additional benefit), and with respect to any charges for qualified additional benefits, at the time of a determination under subparagraph (A) or (E) and which is based on--
(C) Guideline level premium. --The term “guideline level premium” means the level annual amount, payable over the longest period permitted under the contract (but ending not less than 20 years from date of issue or not later than age 95, if earlier), computed on the same basis as the guideline single premium, except that subparagraph (B)(ii) shall be applied by substituting “4 percent” for “6 percent”.
(D) Computational rules. --In computing the guideline single premium or guideline level premium under subparagraph (B) or (C)--
(E) Adjustments. --The guideline single premium and guideline level premium shall be adjusted in the event of a change in the future benefits or any qualified additional benefit under the contract which was not reflected in any guideline single premiums or guideline level premium previously determined.
(3) Other definitions and special rules. --For purposes of this subsection--
(A) Flexible premium life insurance contract. --The terms “flexible premium life insurance contract” and “contract” mean a life insurance contract (including any qualified additional benefits) which provides for the payment of one or more premiums which are not fixed by the insurer as to both timing and amount. Such terms do not include that portion of any contract which is treated under State law as providing any annuity benefits other than as a settlement option.
(B) Premiums paid. --The term “premiums paid” means the premiums paid under the contract less any amounts (other than amounts includible in gross income) to which section 72(e) applies. If, in order to comply with the requirements of paragraph (1)(A), any portion of any premium paid during any contract year is returned by the insurance company (with interest) within 60 days after the end of a contract year--
(ii) notwithstanding the provisions of section 72(e) , the amount of any interest so returned shall be includible in the gross income of the recipient.
(C) Applicable percentage. --The term “applicable percentage” means--
(D) Cash value. --The cash value of any contract shall be determined without regard to any deduction for any surrender charge or policy loan.
(E) Qualified additional benefits. --The term “qualified additional benefits” means any--
(F) Premium payments not disqualifying contract. --The payment of a premium which would result in the sum of the premiums paid exceeding the guideline premium limitation shall be disregarded for purposes of paragraph (1)(A)(i) if the amount of such premium does not exceed the amount necessary to prevent the termination of the contract without cash value on or before the end of the contract year.
(G) Net single premium. --In computing the net single premium under paragraph (1)(B)--
(ii) interest shall be based on the greater of--
(H) Correction of errors. --If the taxpayer establishes to the satisfaction of the Secretary that--
(I) Regulations.-- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.
(g) Treatment of certain accelerated death benefits.--
(1) In general. --For purposes of this section, the following amounts shall be treated as an amount paid by reason of the death of an insured:
(2) Treatment of viatical settlements.--
(A) In general. --If any portion of the death benefit under a life insurance contract on the life of an insured described in paragraph (1) is sold or assigned to a viatical settlement provider, the amount paid for the sale or assignment of such portion shall be treated as an amount paid under the life insurance contract by reason of the death of such insured.
(B) Viatical settlement provider.--
(i) In general. --The term “viatical settlement provider” means any person regularly engaged in the trade or business of purchasing, or taking assignments of, life insurance contracts on the lives of insureds described in paragraph (1) if--
(ii) Terminally ill insureds. --A person meets the requirements of this clause with respect to an insured who is a terminally ill individual if such person--
(iii) Chronically ill insureds. --A person meets the requirements of this clause with respect to an insured who is a chronically ill individual if such person--
(3) Special rules for chronically ill insureds. --In the case of an insured who is a chronically ill individual--
(A) In general. --Paragraphs (1) and (2) shall not apply to any payment received for any period unless--
(ii) the terms of the contract giving rise to such payment satisfy--
(I) the requirements of section 7702B(b)(1)(B) , and
(B) Other requirements. --The requirements applicable under this subparagraph are--
(iii) standards adopted by the State in which the policyholder resides (and if such standards are adopted, the analogous requirements specified under clause (i) and (subject to section 4980C(f) ) standards under clause (ii), shall cease to apply).
(C) Per diem payments. --A payment shall not fail to be described in subparagraph (A) by reason of being made on a per diem or other periodic basis without regard to the expenses incurred during the period to which the payment relates.
(D) Limitation on exclusion for periodic payments.--
For limitation on amount of periodic payments which are treated as described in paragraph (1), see section 7702B(d) .
(4) Definitions. --For purposes of this subsection--
(A) Terminally ill individual. --The term “terminally ill individual” means an individual who has been certified by a physician as having an illness or physical condition which can reasonably be expected to result in death in 24 months or less after the date of the certification.
(B) Chronically ill individual. --The term “chronically ill individual” has the meaning given such term by section 7702B(c)(2) ; except that such term shall not include a terminally ill individual.
(C) Qualified long-term care services. --The term “qualified long-term care services” has the meaning given such term by section 7702B(c) .
(D) Physician. --The term “physician” has the meaning given to such term by section 1861(r)(1) of the Social Security Act ( 42 U.S.C. 1395x(r)(1) ).
(5) Exception for business-related policies. --This subsection shall not apply in the case of any amount paid to any taxpayer other than the insured if such taxpayer has an insurable interest with respect to the life of the insured by reason of the insured being a director, officer, or employee of the taxpayer or by reason of the insured being financially interested in any trade or business carried on by the taxpayer.
(h) Survivor benefits attributable to service by a public safety officer who is killed in the line of duty.--
(1) In general. --Gross income shall not include any amount paid as a survivor annuity on account of the death of a public safety officer (as such term is defined in section 1204 of the Omnibus Crime Control and Safe Streets Act of 1968, as in effect immediately before the enactment of the National Defense Authorization Act for Fiscal Year 2013) killed in the line of duty--
(A) if such annuity is provided, under a governmental plan which meets the requirements of section 401(a) , to the spouse (or a former spouse) of the public safety officer or to a child of such officer; and
(2) Exceptions. --Paragraph (1) shall not apply with respect to the death of any public safety officer if, as determined in accordance with the provisions of the Omnibus Crime Control and Safe Streets Act of 1968--
(i) Certain employee death benefits payable by reason of death of certain terrorist victims or astronauts. --
(1) In general. --Gross income does not include amounts (whether in a single sum or otherwise) paid by an employer by reason of the death of an employee who is a specified terrorist victim (as defined in section 692(d)(4) ).
(A) In general. --Subject to such rules as the Secretary may prescribe, paragraph (1) shall not apply to amounts which would have been payable after death if the individual had died other than as a specified terrorist victim (as so defined).
(B) Exception. --Subparagraph (A) shall not apply to incidental death benefits paid from a plan described in section 401(a) and exempt from tax under section 501(a) .
(3) Treatment of self-employed individuals. --For purposes of paragraph (1), the term ‘employee’ includes a self-employed individual (as defined in section 401(c)(1) ).
(4) Relief with respect to astronauts. --The provisions of this subsection shall apply to any astronaut whose death occurs in the line of duty.
(j) Treatment of certain employer-owned life insurance contracts. --
(1) General rule. --In the case of an employer-owned life insurance contract, the amount excluded from gross income of an applicable policyholder by reason of paragraph (1) of subsection (a) shall not exceed an amount equal to the sum of the premiums and other amounts paid by the policyholder for the contract.
(2) Exceptions. --In the case of an employer-owned life insurance contract with respect to which the notice and consent requirements of paragraph (4) are met, paragraph (1) shall not apply to any of the following:
(A) Exceptions based on insured's status. --Any amount received by reason of the death of an insured who, with respect to an applicable policyholder--
(ii) is, at the time the contract is issued--
(III) a highly compensated individual within the meaning of section 105(h)(5) , except that “35 percent” shall be substituted for “25 percent” in subparagraph (C) thereof.
(B) Exception for amounts paid to insured's heirs. --Any amount received by reason of the death of an insured to the extent--
(i) the amount is paid to a member of the family (within the meaning of section 267(c)(4) ) of the insured, any individual who is the designated beneficiary of the insured under the contract (other than the applicable policyholder), a trust established for the benefit of any such member of the family or designated beneficiary, or the estate of the insured, or
(3) Employer-owned life insurance contract. --
(A) In general. --For purposes of this subsection, the term “employer-owned life insurance contract” means a life insurance contract which--
For purposes of the preceding sentence, if coverage for each insured under a master contract is treated as a separate contract for purposes of sections 817(h) , 7702 , and 7702A , coverage for each such insured shall be treated as a separate contract.
(B) Applicable policyholder. --For purposes of this subsection--
(i) In general. --The term “applicable policyholder” means, with respect to any employer-owned life insurance contract, the person described in subparagraph (A)(i) which owns the contract.
(ii) Related persons. --The term “applicable policyholder” includes any person which--
(I) bears a relationship to the person described in clause (i) which is specified in section 267(b) or 707(b)(1) , or
(II) is engaged in trades or businesses with such person which are under common control (within the meaning of subsection (a) or (b) of section 52 ).
(4) Notice and consent requirements. --The notice and consent requirements of this paragraph are met if, before the issuance of the contract, the employee--
(5) Definitions. --For purposes of this subsection--
(A) Employee. --The term “employee” includes an officer, director, and highly compensated employee (within the meaning of section 414(q) ).
(B) Insured. --The term “insured” means, with respect to an employer-owned life insurance contract, an individual covered by the contract who is a United States citizen or resident. In the case of a contract covering the joint lives of 2 individuals, references to an insured include both of the individuals.
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