Source: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section264&num=0&edition=prelim
Timestamp: 2020-08-14 18:04:51
Document Index: 244600528

Matched Legal Cases: ['§ 264', '§264', '§215', '§1003', '§501', '§1084', '§1602', '§6010', '§4003', '§6010', '§6010', '§6010', '§6010', '§1084', '§1084', '§1602', '§1602', '§501', '§501', '§501', '§1602', '§1003', '§215', '§501', '§1602']

[USC02] 26 USC 264: Certain amounts paid in connection with insurance contracts
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26 USC 264: Certain amounts paid in connection with insurance contracts Text contains those laws in effect on August 13, 2020
§264. Certain amounts paid in connection with insurance contracts
No deduction shall be allowed for-
Subsection (a)(1) shall not apply to-
For purposes of subsection (a)(2), a contract shall be treated as a single premium contract-
Subsection (a)(3) shall not apply to any amount paid or accrued by a person during a taxable year on indebtedness incurred or continued as part of a plan referred to in subsection (a)(3)-
(2) if the total of the amounts paid or accrued by such person during such taxable year for which (without regard to this paragraph) no deduction would be allowable by reason of subsection (a)(3) does not exceed $100,
For purposes of applying paragraph (1), if there is a substantial increase in the premiums on a contract, a new 7-year period described in such paragraph with respect to such contract shall commence on the date the first such increased premium is paid.
The applicable rate of interest for any month is the rate of interest described as Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investors Service, Inc., or any successor thereto, for such month.
In the case of indebtedness on a contract purchased on or before June 20, 1986-
(I) which is a contract providing a fixed rate of interest, the applicable rate of interest for any month shall be the Moody's rate described in clause (i) for the month in which the contract was purchased, or
(II) which is a contract providing a variable rate of interest, the applicable rate of interest for any month in an applicable period shall be such Moody's rate for the third month preceding the first month in such period.
For purposes of subclause (II), the term "applicable period" means the 12-month period beginning on the date the policy is issued (and each successive 12-month period thereafter) unless the taxpayer elects a number of months (not greater than 12) other than such 12-month period to be its applicable period. Such an election shall be made not later than the 90th day after the date of the enactment of this sentence and, if made, shall apply to the taxpayer's first taxable year ending on or after October 13, 1995, and all subsequent taxable years unless revoked with the consent of the Secretary.
For purposes of paragraph (1), the term "key person" means an officer or 20-percent owner, except that the number of individuals who may be treated as key persons with respect to any taxpayer shall not exceed the greater of-
For purposes of this subsection, the term "20-percent owner" means-
For purposes of paragraph (4)(A) and applying the $50,000 limitation in paragraph (1)-
No deduction shall be allowed for that portion of the taxpayer's interest expense which is allocable to unborrowed policy cash values.
For purposes of paragraph (1), the portion of the taxpayer's interest expense which is allocable to unborrowed policy cash values is an amount which bears the same ratio to such interest expense as-
(A) the taxpayer's average unborrowed policy cash values of life insurance policies, and annuity and endowment contracts, issued after June 8, 1997, bears to
For purposes of this subsection, the term "unborrowed policy cash value" means, with respect to any life insurance policy or annuity or endowment contract, the excess of-
Paragraph (1) shall not apply to any policy or contract owned by an entity engaged in a trade or business if such policy or contract covers only 1 individual and if such individual is (at the time first covered by the policy or contract)-
A policy or contract covering a 20-percent owner of such entity shall not be treated as failing to meet the requirements of the preceding sentence by reason of covering the joint lives of such owner and such owner's spouse.
For purposes of subparagraph (A), the term "20-percent owner" has the meaning given such term by subsection (e)(4).
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 for purposes of subparagraph (A). For purposes of the preceding sentence, the term "master contract" shall not include any group life insurance contract (as defined in section 848(e)(2)).
If interest on any indebtedness is disallowed under subsection (a) or section 265-
The term "interest expense" means the aggregate amount allowable to the taxpayer as a deduction for interest (within the meaning of section 265(b)(4)) for the taxable year (determined without regard to this subsection, section 265(b), and section 291).
(Aug. 16, 1954, ch. 736, 68A Stat. 77 ; Pub. L. 88–272, title II, §215(a), (b), Feb. 26, 1964, 78 Stat. 55 ; Pub. L. 99–514, title X, §1003(a), (b), Oct. 22, 1986, 100 Stat. 2388 ; Pub. L. 104–191, title V, §501(a), (b), Aug. 21, 1996, 110 Stat. 2090 ; Pub. L. 105–34, title X, §1084(a), (b)(1), (c), title XVI, §1602(f)(1)–(3), Aug. 5, 1997, 111 Stat. 951 , 952, 1094, 1095; Pub. L. 105–206, title VI, §6010(o)(1)–(3)(A), (4)(A), (5), July 22, 1998, 112 Stat. 816 ; Pub. L. 105–277, div. J, title IV, §4003(i), Oct. 21, 1998, 112 Stat. 2681–910 .)
1998-Subsec. (a)(3). Pub. L. 105–206, §6010(o)(1), substituted "subsection (d)" for "subsection (c)".
Subsec. (a)(4). Pub. L. 105–206, §6010(o)(2), substituted "subsection (e)" for "subsection (d)".
Subsec. (f)(5)(A)(iv). Pub. L. 105–206, §6010(o)(4)(A), struck out at end "Any report required under the preceding sentence shall be treated as a statement referred to in section 6724(d)(1)."
Subsec. (f)(8)(A). Pub. L. 105–206, §6010(o)(5), substituted "subsection (e)(5)(B)" for "subsection (d)(5)(B)".
1997-Subsec. (a)(1). Pub. L. 105–34, §1084(a)(1), amended par. (1) generally. Prior to amendment, par. (1) read as follows: "Premiums paid on any life insurance policy covering the life of any officer or employee, or of any person financially interested in any trade or business carried on by the taxpayer, when the taxpayer is directly or indirectly a beneficiary under such policy."
"(A) is an officer or employee of, or
"(B) is financially interested in,
any trade or business carried on by the taxpayer."
Pub. L. 105–34, §1084(b)(1), substituted "individual." for "individual, who-
"(A) is or was an officer or employee, or
"(B) is or was financially interested in,
any trade or business carried on (currently or formerly) by the taxpayer."
Subsec. (d)(2)(B)(ii). Pub. L. 105–34, §1602(f)(2), amended concluding provisions generally. Prior to amendment, concluding provisions read as follows: "For purposes of subclause (II), the taxpayer shall elect an applicable period for such contract on its return of tax imposed by this chapter for its first taxable year ending on or after October 13, 1995. Such applicable period shall be for any number of months (not greater than 12) specified in the election and may not be changed by the taxpayer without the consent of the Secretary."
Subsec. (d)(4)(B). Pub. L. 105–34, §1602(f)(3), substituted "interest in the taxpayer" for "interest in the employer".
1996-Subsec. (a)(4). Pub. L. 104–191, §501(a)(1), (b)(1), in introductory provisions, substituted "Except as provided in subsection (d), any" for "Any" and inserted ", or any endowment or annuity contracts owned by the taxpayer covering any individual," after "the life of any individual".
Pub. L. 104–191, §501(a)(2), struck out "to the extent that the aggregate amount of such indebtedness with respect to policies covering such individual exceeds $50,000" after "carried on by the taxpayer" in concluding provisions.
1986-Subsec. (a). Pub. L. 99–514 added par. (4) and last sentence providing that par. (4) shall apply with respect to contracts purchased after June 20, 1986.
1964-Subsec. (a). Pub. L. 88–272 added par. (3) and sentence providing that par. (3) shall apply only to contracts purchased after August 6, 1963.
Pub. L. 104–191, title V, §501(c), Aug. 21, 1996, 110 Stat. 2091 , as amended by Pub. L. 105–34, title XVI, §1602(f)(4), Aug. 5, 1997, 111 Stat. 1095 , provided that:
"(1) In general.-The amendments made by this section [amending this section] shall apply to interest paid or accrued after October 13, 1995.
"(2) Transition rule for existing indebtedness.-
"(A) In general.-In the case of-
"(i) indebtedness incurred before January 1, 1996, or
"(ii) indebtedness incurred before January 1, 1997 with respect to any contract or policy entered into in 1994 or 1995,
"(B) Qualified interest.-For purposes of subparagraph (A), the qualified interest with respect to any indebtedness for any month is the amount of interest (otherwise deductible) which would be paid or accrued for such month on such indebtedness if-
"(i) in the case of any interest paid or accrued after December 31, 1995, indebtedness with respect to no more than 20,000 insured individuals were taken into account, and
"(ii) the lesser of the following rates of interest were used for such month:
"(I) The rate of interest specified under the terms of the indebtedness as in effect on October 13, 1995 (and without regard to modification of such terms after such date).
"(II) The applicable percentage of the rate of interest described as Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investors Service, Inc., or any successor thereto, for such month.
"(C) Applicable percentage.-For purposes of subparagraph (B), the applicable percentage is as follows:
1996 100 percent
1997 90 percent
1998 80 percent."
Pub. L. 99–514, title X, §1003(c), Oct. 22, 1986, 100 Stat. 2388 , provided that: "The amendments made by this section [amending this section] shall apply to contracts purchased after June 20, 1986, in taxable years ending after such date."
Pub. L. 88–272, title II, §215(c), Feb. 26, 1964, 78 Stat. 56 , provided that: "The amendments made by this section [amending this section] shall apply with respect to amounts paid or accrued in taxable years beginning after December 31, 1963."
Pub. L. 104–191, title V, §501(d), Aug. 21, 1996, 110 Stat. 2092 , as amended by Pub. L. 105–34, title XVI, §1602(f)(5), Aug. 5, 1997, 111 Stat. 1095 , provided that:
"(1) In general.-If any amount is received under any life insurance policy or endowment or annuity contract described in paragraph (4) of section 264(a) of the Internal Revenue Code of 1986-
"(A) on the complete surrender, redemption, or maturity of such policy or contract during calendar year 1996, 1997, or 1998, or
"(B) in full discharge during any such calendar year of the obligation under the policy or contract which is in the nature of a refund of the consideration paid for the policy or contract,
"(2) Special rules for applying section 264.-A contract shall not be treated as-
"(A) failing to meet the requirement of section 264(c)(1) of the Internal Revenue Code of 1986, or
"(B) a single premium contract under section 264(b)(1) of such Code,
"(3) Special rule for deferred acquisition costs.-In the case of the occurrence of any event described in subparagraph (A) or (B) of paragraph (1) of this subsection with respect to any policy or contract-
"(A) section 848 of the Internal Revenue Code of 1986 shall not apply to the unamortized balance (if any) of the specified policy acquisition expenses attributable to such policy or contract immediately before the insurance company's taxable year in which such event occurs, and
"(B) there shall be allowed as a deduction to such company for such taxable year under chapter 1 of such Code an amount equal to such unamortized balance."