Source: http://taxtv.com/code/00262-USCODE-2011-title26-subtitleA-chap1-subchapB-partIX-sec264/
Timestamp: 2017-10-24 04:15:38
Document Index: 792575768

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

IRC §264. Certain amounts paid in connection with insurance contracts - TaxTV.com
IRC §264. Certain amounts paid in connection with insurance contracts
View related content: IRC §264
(1) Premiums on any life insurance policy, or endowment or annuity contract, if the taxpayer is directly or indirectly a beneficiary under the policy or contract.
(3) Except as provided in subsection (d), any amount paid or accrued on indebtedness incurred or continued to purchase or carry a life insurance, endowment, or annuity contract (other than a single premium contract or a contract treated as a single premium contract) pursuant to a plan of purchase which contemplates the systematic direct or indirect borrowing of part or all of the increases in the cash value of such contract (either from the insurer or otherwise).
(4) Except as provided in subsection (e), any interest paid or accrued on any indebtedness with respect to 1 or more life insurance policies owned by the taxpayer covering the life of any individual, or any endowment or annuity contracts owned by the taxpayer covering any individual.
(b) Exceptions to subsection (a)(1)
(1) any annuity contract described in section 72(s)(5), and
(2) any annuity contract to which section 72(u) applies.
(c) Contracts treated as single premium contracts
For purposes of subsection (a)(2), a contract shall be treated as a single premium contract—
(2) if an amount is deposited after March 1, 1954, with the insurer for payment of a substantial number of future premiums on the 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)—
(1) if no part of 4 of the annual premiums due during the 7-year period (beginning with the date the first premium on the contract to which such plan relates was paid) is paid under such plan by means of indebtedness,
(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.
(3) if such amount was paid or accrued on indebtedness incurred because of an unforeseen substantial loss of income or unforeseen substantial increase in his financial obligations, or
(4) if such indebtedness was incurred in connection with his trade or business.
(B) Applicable rate of interest
(ii) Pre-1986 contracts
(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.
(3) Key person
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—
(A) 5 individuals, or
(B) the lesser of 5 percent of the total officers and employees of the taxpayer or 20 individuals.
(4) 20-percent owner
For purposes of this subsection, the term “20-percent owner” means—
(A) if the taxpayer is a corporation, any person who owns directly 20 percent or more of the outstanding stock of the corporation or stock possessing 20 percent or more of the total combined voting power of all stock of the corporation, or
(B) if the taxpayer is not a corporation, any person who owns 20 percent or more of the capital or profits interest in the taxpayer.
For purposes of paragraph (4)(A) and applying the $50,000 limitation in paragraph (1)—
(i) all members of a controlled group shall be treated as one taxpayer, and
(ii) such limitation shall be allocated among the members of such group in such manner as the Secretary may prescribe.
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
(i) in the case of assets of the taxpayer which are life insurance policies or annuity or endowment contracts, the average unborrowed policy cash values of such policies and contracts, and
(ii) in the case of assets of the taxpayer not described in clause (i), the average adjusted bases (within the meaning of section 1016) of such assets.
(3) Unborrowed policy cash value
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—
(A) the cash surrender value of such policy or contract determined without regard to any surrender charge, over
(B) the amount of any loan with respect to such policy or contract.
(A) Policies and contracts covering 20-percent owners, officers, directors, and employees
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)—
(i) a 20-percent owner of such entity, or
(ii) an individual (not described in clause (i)) who is an officer, director, or employee of such trade or business.
(A) Coordination with subsection (a) and section 265
If interest on any indebtedness is disallowed under subsection (a) or section 265—
(i) such disallowed interest shall not be taken into account for purposes of applying this subsection, and
(ii) the amount otherwise taken into account under paragraph (2)(B) shall be reduced (but not below zero) by the amount of such indebtedness.
(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– 4, 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. 9 , 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)(4)(E). Pub. L. 105–206, §6010(o)(3)(A), added subpar. (E).
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.”
Subsec. (a)(4). Pub. L. 105–34, §1602(f)(1), added subpars. (A) and (B) and concluding provisions and struck out former subpars. (A) and (B) and concluding provisions which read as follows:
Pub. L. 105–34, §1084(b)(1), substituted “individual.” for “individual, who—
Subsecs. (b), (c). Pub. L. 105–34, §1084(a)(2), added subsec. (b) and redesignated former subsec. (b) as (c). Former subsec. (c) redesignated (d).
Subsec. (d). Pub. L. 105–34, §1084(a)(2), redesignated subsec. (c) as (d). Former subsec. (d) redesignated (e).
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”.
Subsec. (e). Pub. L. 105–34, §1084(a)(2), redesignated subsec. (d) as (e).
Subsec. (f). Pub. L. 105–34, §1084(c), added subsec. (f).
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.
Subsec. (d). Pub. L. 104–191, §501(b)(2), added subsec. (d).
1986—Subsec. (a). Pub. L. 99– 4 added par. (4) and last sentence providing that par. (4) shall apply with respect to contracts purchased after June 20, 1986.
Section 501(c) of Pub. L. 104–191, as amended by Pub. L. 105–34, title XVI, §1602(f)(4), Aug. 5, 1997, 111 Stat. 1095, provided that:
Section 1003(c) of Pub. L. 99– 4 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.”
Section 215(c) of Pub. L. 88–272 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.”
Section 501(d) of Pub. L. 104–191, as amended by Pub. L. 105–34, title XVI, §1602(f)(5), Aug. 5, 1997, 111 Stat. 1095, provided that: