A bill to amend the Internal Revenue Code of 1986 with respect to the taxation of life insurance contracts and annuity contracts.

Summary

Amends the Internal Revenue Code with respect to income tax treatment of life insurance contracts and annuity contracts. Provides that loans under certain life insurance contracts (including single premium life insurance contracts), amounts pledged or assigned under such contracts, and the transfers of such contracts made without adequate consideration shall be included in gross taxable income to the extent allocable to income on the contract (thus conforming the tax treatment of loans under life insurance contracts to the law currently applied to annuity contracts). Applies these loan and transfer rules to corporations as well as to individuals and amends the corresponding law currently applied to annuity contracts to include corporations. Reverses the ordering rules for distributions under life insurance and endowment contracts so that distributions would be treated first as income and then as basis. Imposes a ten percent penalty tax on the amount of any taxable distribution or loan under a life insurance contract. Exempts from this penalty any distribution: (1) made on or after the date on which the taxpayer attains age 59 1/2; (2) attributable to the taxpayer's becoming disabled; (3) that is part of an annuity-like plan under which periodic payments are made over the taxpayer's life; or (4) allocable to investment in the contract on or before October 7, 1987.

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Documents

1 official file

• Introduced in House

  summary · EN · 7 October 1987

  Open at official source

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