
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-134 Section 102(a)]
[Document affected by Public Law 107-15 Section 2]
[Document affected by Public Law 107-134 Section 102(b)]
[Document affected by Public Law 107-16 Section 803]
[Document affected by Public Law 106-519 Section 4(6)]
[Document affected by Public Law 107-134 Section 111(b)]
[CITE: 26USC101]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
         PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
 
Sec. 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), 
    and subsection (f), 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--
            (A) if such contract or interest therein has a basis for 
        determining gain or loss in the hands of a transferee determined 
        in whole or in part by reference to such basis of such contract 
        or interest therein in the hands of the transferor, or
            (B) if such transfer is to the insured, to a partner of the 
        insured, to a partnership in which the insured is a partner, or 
        to a corporation in which the insured is a shareholder or 
        officer.

    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, Sec. 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--
            (A) held by any insurer under an agreement provided for in 
        the life insurance contract, whether as an option or otherwise, 
        to pay such amount on a date or dates later than the death of 
        the insured, and
            (B) equal to the value of such agreement to such beneficiary
                (i) as of the date of death of the insured (as if any 
            option exercised under the life insurance contract were 
            exercised at such time), and
                (ii) as discounted on the basis of the interest rate 
            used by the insurer in calculating payments under the 
            agreement and mortality tables prescribed by the Secretary.

                    (3) Application of subsection

        This subsection shall not apply to any amount to which 
    subsection (c) is applicable.

[(e) Repealed. Pub. L. 98-369, div. A, title IV, Sec. 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--
                (i) the sum of the premiums paid under such contract 
            does not at any time exceed the guideline premium limitation 
            as of such time, and
                (ii) any amount payable by reason of the death of the 
            insured (determined without regard to any qualified 
            additional benefit) is not at any time less than the 
            applicable percentage of the cash value of such contract at 
            such time, or

            (B) by the terms of such contract, the cash value of such 
        contract may not at any time exceed the net single premium with 
        respect to the amount payable by reason of the death of the 
        insured (determined without regard to any qualified additional 
        benefit) at such time.

                  (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--
                (i) the guideline single premium, or
                (ii) the sum of the guideline level premiums to such 
            date.

        (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--
                (i) the mortality and other charges guaranteed under the 
            contract, and
                (ii) interest at the greater of an annual effective rate 
            of 6 percent or the minimum rate or rates guaranteed upon 
            issue of the contract.

        (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)--
                (i) the excess of the amount payable by reason of the 
            death of the insured (determined without regard to any 
            qualified additional benefit) over the cash value of the 
            contract shall be deemed to be not greater than such excess 
            at the time the contract was issued,
                (ii) the maturity date shall be the latest maturity date 
            permitted under the contract, but not less than 20 years 
            after the date of issue or (if earlier) age 95, and
                (iii) the amount of any endowment benefit (or sum of 
            endowment benefits) shall be deemed not to exceed the least 
            amount payable by reason of the death of the insured 
            (determined without regard to any qualified additional 
            benefit) at any time under the contract.

        (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--
                (i) the amount so returned (excluding interest) shall be 
            deemed to reduce the sum of the premiums paid under the 
            contract during such year, and
                (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--
                (i) 140 percent in the case of an insured with an 
            attained age at the beginning of the contract year of 40 or 
            less, and
                (ii) in the case of an insured with an attained age of 
            more than 40 as of the beginning of the contract year, 140 
            percent reduced (but not below 105 percent) by one percent 
            for each year in excess of 40.

        (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--
                (i) guaranteed insurability,
                (ii) accidental death benefit,
                (iii) family term coverage, or
                (iv) waiver of premium.

        (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)--
                (i) the mortality basis shall be that guaranteed under 
            the contract (determined by reference to the most recent 
            mortality table allowed under all State laws on the date of 
            issuance),
                (ii) interest shall be based on the greater of--
                    (I) an annual effective rate of 4 percent (3 percent 
                for contracts issued before July 1, 1983), or
                    (II) the minimum rate or rates guaranteed upon issue 
                of the contract, and

                (iii) the computational rules of paragraph (2)(D) shall 
            apply, except that the maturity date referred to in clause 
            (ii) thereof shall not be earlier than age 95.

        (H) Correction of errors

            If the taxpayer establishes to the satisfaction of the 
        Secretary that--
                (i) the requirements described in paragraph (1) for any 
            contract year was not satisfied due to reasonable error, and
                (ii) reasonable steps are being taken to remedy the 
            error,

        the Secretary may waive the failure to satisfy such 
        requirements.

        (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:
            (A) Any amount received under a life insurance contract on 
        the life of an insured who is a terminally ill individual.
            (B) Any amount received under a life insurance contract on 
        the life of an insured who is a chronically ill individual.

                (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--
                    (I) such person is licensed for such purposes (with 
                respect to insureds described in the same subparagraph 
                of paragraph (1) as the insured) in the State in which 
                the insured resides, or
                    (II) in the case of an insured who resides in a 
                State not requiring the licensing of such persons for 
                such purposes with respect to such insured, such person 
                meets the requirements of clause (ii) or (iii), 
                whichever applies to such insured.
            (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--
                    (I) meets the requirements of sections 8 and 9 of 
                the Viatical Settlements Model Act of the National 
                Association of Insurance Commissioners, and
                    (II) meets the requirements of the Model Regulations 
                of the National Association of Insurance Commissioners 
                (relating to standards for evaluation of reasonable 
                payments) in determining amounts paid by such person in 
                connection with such purchases or assignments.
            (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--
                    (I) meets requirements similar to the requirements 
                referred to in clause (ii)(I), and
                    (II) meets the standards (if any) of the National 
                Association of Insurance Commissioners for evaluating 
                the reasonableness of amounts paid by such person in 
                connection with such purchases or assignments with 
                respect to chronically ill individuals.

           (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--
                (i) such payment is for costs incurred by the payee (not 
            compensated for by insurance or otherwise) for qualified 
            long-term care services provided for the insured for such 
            period, and
                (ii) the terms of the contract giving rise to such 
            payment satisfy--
                    (I) the requirements of section 7702B(b)(1)(B), and
                    (II) the requirements (if any) applicable under 
                subparagraph (B).

        For purposes of the preceding sentence, the rule of section 
        7702B(b)(2)(B) shall apply.

        (B) Other requirements

            The requirements applicable under this subparagraph are--
                (i) those requirements of section 7702B(g) and section 
            4980C which the Secretary specifies as applying to such a 
            purchase, assignment, or other arrangement,
                (ii) standards adopted by the National Association of 
            Insurance Commissioners which specifically apply to 
            chronically ill individuals (and, if such standards are 
            adopted, the analogous requirements specified under clause 
            (i) shall cease to apply), and
                (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) 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
            (B) to the extent such annuity is attributable to such 
        officer's service as a public safety officer.

                           (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--
            (A) the death was caused by the intentional misconduct of 
        the officer or by such officer's intention to bring about such 
        officer's death;
            (B) the officer was voluntarily intoxicated (as defined in 
        section 1204 of such Act) at the time of death;
            (C) the officer was performing such officer's duties in a 
        grossly negligent manner at the time of death; or
            (D) the payment is to an individual whose actions were a 
        substantial contributing factor to the death of the officer.

(Aug. 16, 1954, ch. 736, 68A Stat. 26; Pub. L. 85-866, title I, 
Sec. 23(d), Sept. 2, 1958, 72 Stat. 1622; Pub. L. 87-792, Sec. 7(c), 
Oct. 10, 1962, 76 Stat. 829; Pub. L. 89-365, Sec. 1(c), Mar. 8, 1966, 80 
Stat. 32; Pub. L. 91-172, title I, Sec. 101(j)(l), Dec. 30, 1969, 83 
Stat. 526; Pub. L. 93-406, title II, Secs. 2005(c)(15), 2007(b)(3), 
Sept. 2, 1974, 88 Stat. 992, 994; Pub. L. 94-455, title XIX, 
Secs. 1901(a)(16), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1765, 1834; 
Pub. L. 97-248, title II, Secs. 239, 266(a), (b), Sept. 3, 1982, 96 
Stat. 514, 547, 550; Pub. L. 98-369, div. A, title II, Sec. 221(b)(2), 
title IV, Sec. 421(b)(2), title VII, Sec. 713(e), July 18, 1984, 98 
Stat. 772, 794, 958; Pub. L. 99-514, title X, Sec. 1001(a)-(c), Oct. 22, 
1986, 100 Stat. 2387; Pub. L. 104-188, title I, Sec. 1402(a), (b)(1), 
Aug. 20, 1996, 110 Stat. 1789; Pub. L. 104-191, title III, Sec. 331(a), 
Aug. 21, 1996, 110 Stat. 2067; Pub. L. 105-34, title X, Sec. 1084(b)(2), 
title XV, Sec. 1528(a), Aug. 5, 1997, 111 Stat. 952, 1074.)

                       References in Text

    The Omnibus Crime Control and Safe Streets Act of 1968, referred to 
in subsec. (h), is Pub. L. 90-351, June 19, 1968, 82 Stat. 197, as 
amended. Section 1204 of the Act is classified to section 3796b of Title 
42, The Public Health and Welfare. For complete classification of this 
Act to the Code, see Short Title note set out under section 3711 of 
Title 42 and Tables.

                          Codification

    Another section 1084(b) of Pub. L. 105-34 amended sections 805, 807, 
812, and 832 of this title.


                               Amendments

    1997--Subsec. (a)(2). Pub. L. 105-34, Sec. 1084(b)(2), inserted at 
end ``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).''
    Subsec. (h). Pub. L. 105-34, Sec. 1528(a), added subsec. (h).
    1996--Subsec. (b). Pub. L. 104-188, Sec. 1402(a), struck out subsec. 
(b) which related to employees' death benefits.
    Subsec. (c). Pub. L. 104-188, Sec. 1402(b)(1), substituted 
``subsection (a)'' for ``subsection (a) or (b)''.
    Subsec. (g). Pub. L. 104-191 added subsec. (g).
    1986--Subsec. (d)(1). Pub. L. 99-514, Sec. 1001(a), amended second 
sentence generally, which prior to amendment read as follows: ``There 
shall be excluded from the gross income of such beneficiary in the 
taxable year received--
        ``(A) any amount determined by such proration, and
        ``(B) in the case of the surviving spouse of the insured, that 
    portion of the excess of the amounts received under one or more 
    agreements specified in paragraph (2)(A) (whether or not payment of 
    any part of such amounts is guaranteed by the insurer) over the 
    amount determined in subparagraph (A) of this paragraph which is not 
    greater than $1,000 with respect to any insured.''
    Subsec. (d)(2)(B). Pub. L. 99-514, Sec. 1001(c)(2), substituted 
``equal'' for ``is equal'' in introductory provisions.
    Subsec. (d)(2)(B)(ii). Pub. L. 99-514, Sec. 1001(b), amended cl. 
(ii) generally. Prior to amendment, cl. (ii) read as follows: ``as 
discounted on the basis of the interest rate and mortality tables used 
by the insurer in calculating payments under the agreement.''
    Subsec. (d)(3), (4). Pub. L. 99-514, Sec. 1001(c)(1), redesignated 
par. (4) as (3), and struck out former par. (3), ``Surviving spouse'', 
which read as follows: ``For purposes of this subsection, the term 
`surviving spouse' means the spouse of the insured as of the date of 
death, including a spouse legally separated but not under a decree of 
absolute divorce.''
    1984--Subsec. (b)(3)(B). Pub. L. 98-369, Sec. 713(e), amended 
subpar. (B) generally, substituting ``certain distributions'' for 
``certain lump sum distributions'' in heading, substituting ``amount 
paid or distributed'' for ``lump sum distribution described in the 
second sentence of paragraph (2)(B)'' in introductory text and adding 
cls. (i) and (ii).
    Subsec. (e). Pub. L. 98-369, Sec. 421(b)(2), repealed subsec. (e) 
relating to payments of alimony or of income of an estate or trust in 
case of divorce, etc.
    Subsec. (f). Pub. L. 98-369, Sec. 221(b)(2)(B), inserted ``issued 
before January 1, 1985'' in heading.
    Subsec. (f)(1). Pub. L. 98-369, Sec. 221(b)(2)(A), inserted ``issued 
before January 1, 1985'' in introductory text.
    1982--Subsec. (a)(1). Pub. L. 97-248, Sec. 266(b), substituted ``, 
subsection (d), and subsection (f)'' for ``and in subsection (d)''.
    Subsec. (b)(3). Pub. L. 97-248, Sec. 239, amended par. (3) 
generally, substituting ``Treatment of self-employed individuals'' for 
``Self-employed individual not considered an employee'' in heading, 
designating existing provisions as subparagraph (A) and, as so 
designated, adding heading and exception for subpar. (B), and adding 
subparagraph (B).
    Subsec. (f). Pub. L. 97-248, Sec. 266(a), added subsec. (f).
    1976--Subsec. (d)(1). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck 
out ``or his delegate'' after ``Secretary''.
    Subsec. (f). Pub. L. 94-455, Sec. 1901(a)(16), struck out subsec. 
(f) relating to effective date of section.
    1974--Subsec. (b)(2)(B). Pub. L. 93-406, Sec. 2005(c)(15), 
substituted ``a lump sum distribution (as defined in section 402(e)(4)'' 
for ``total distributions payable (as defined in section 402(a)(3)) 
which are paid to a distributee within one taxable year of the 
distributee by reason of the employee's death''.
    Subsec. (b)(2)(D). Pub. L. 93-406, Sec. 2007(b)(3), substituted ``if 
the member or former member of the uniformed services by reason of whose 
death such annuity is payable'' for ``if the individual who made the 
election under such chapter''.
    1969--Subsec. (b)(2)(B)(iii). Pub. L. 91-172 substituted references 
to section 170(b)(1)(A) (ii) and (vi), and to religious organizations, 
for references to section 503(b)(1), (2), or (3).
    1966--Subsec. (b)(2)(D). Pub. L. 89-365 provided that par. (1) shall 
not apply in the case of an annuity under chapter 73 of title 10 if the 
individual who made the election under that chapter died after attaining 
retirement age.
    1962--Subsec. (b)(2)(B)(ii). Pub. L. 87-792, Sec. 7(c)(1), 
substituted ``described in section 403(a)'' for ``which meets the 
requirements of paragraphs (3), (4), (5), and (6) of section 401(a)''.
    Subsec. (b)(3). Pub. L. 87-792, Sec. 7(c)(2), added par. (3).
    1958--Subsec. (b)(2)(B). Pub. L. 85-866 substituted ``This 
subparagraph shall not apply to total distributions payable (as defined 
in section 402(a)(3) which are paid to a distributee within one taxable 
year of the distributee by reason of the employee's death--'' for 
``(other than total distributions payable, as defined in section 
402(a)(3), which are paid to distributee, by a stock bonus, pension, or 
profit-sharing trust described in section 401(a) which is exempt from 
tax under section 501(a), or under an annuity contract under a plan 
which meets the requirements of paragraphs (3), (4), (5), and (6) of 
section 401(a), within one taxable year of the distributee by reason of 
the employee's death)'', and added cls. (i), (ii), and (iii).


                    Effective Date of 1997 Amendment

    Section 1084(d) of Pub. L. 105-34, as amended by Pub. L. 105-206, 
title VI, Sec. 6010(o)(3)(B), July 22, 1998, 112 Stat. 816, provided 
that: ``The amendments made by this section [amending this section and 
sections 264, 265, 805, 807, 812, and 832 of this title] shall apply to 
contracts issued after June 8, 1997, in taxable years ending after such 
date. For purposes of the preceding sentence, any material increase in 
the death benefit or other material change in the contract shall be 
treated as a new contract except that, in the case of a master contract 
(within the meaning of section 264(f)(4)(E) of the Internal Revenue Code 
of 1986), the addition of covered lives shall be treated as a new 
contract only with respect to such additional covered lives. For 
purposes of this subsection, an increase in the death benefit under a 
policy or contract issued in connection with a lapse described in 
section 501(d)(2) of the Health Insurance Portability and Accountability 
Act of 1996 [Pub. L. 104-191, set out as a note under section 264 of 
this title] shall not be treated as a new contract.''
    Section 1528(b) of Pub. L. 105-34 provided that: ``The amendments 
made by this section [amending this section] shall apply to amounts 
received in taxable years beginning after December 31, 1996, with 
respect to individuals dying after such date.''


                    Effective Date of 1996 Amendments

    Section 331(b) of Pub. L. 104-191 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to amounts 
received after December 31, 1996.''
    Section 1402(c) of Pub. L. 104-188 provided that: ``The amendments 
made by this section [amending this section and sections 406, 407, and 
7701 of this title] shall apply with respect to decedents dying after 
the date of the enactment of this Act [Aug. 20, 1996].''


                    Effective Date of 1986 Amendment

    Section 1001(d) of Pub. L. 99-514 provided that: ``The amendments 
made by this section [amending this section] shall apply to amounts 
received with respect to deaths occurring after the date of the 
enactment of this section [Oct. 22, 1986] in taxable years ending after 
such date.''


                    Effective Date of 1984 Amendment

    Amendment by section 221(b)(2) of Pub. L. 98-369 effective Jan. 1, 
1984, see section 221(d)(4) of Pub. L. 98-369, set out as an Effective 
Date note under section 7702 of this title.
    Amendment by section 421(b)(2) of Pub. L. 98-369 applicable to 
transfers after July 18, 1984, in taxable years ending after such date, 
subject to election to have repeal apply to transfers after 1983 or to 
transfers pursuant to existing decrees, see section 421(d) of Pub. L. 
98-369, set out as an Effective Date note under section 1041 of this 
title.
    Amendment by section 713 of Pub. L. 98-369 effective as if included 
in the provision of the Tax Equity and Fiscal Responsibility Act of 
1982, Pub. L. 97-248, to which such amendment relates, see section 715 
of Pub. L. 98-369, set out as a note under section 31 of this title.


                    Effective Date of 1982 Amendments

    Section 266(c)(1) of Pub. L. 97-248, as amended by Pub. L. 98-369, 
div. A, title II, Sec. 221(b)(1), July 18, 1984, 98 Stat. 772, provided 
that: ``The amendments made by this section [amending this section] 
shall apply to contracts entered into before January 1, 1985.''
    Amendment by section 239 of Pub. L. 97-248 applicable to decedents 
dying after Dec. 31, 1983, see section 241(b) of Pub. L. 97-248, set out 
as an Effective Date note under section 416 of this title. Such 
amendment is applicable, in the case of amounts received under the plan 
of an S corporation, with respect to decedents dying after Dec. 31, 
1982, notwithstanding section 241(b) of Pub. L. 97-248, see section 
6(b)(2) of Pub. L. 97-354, Oct. 19, 1982, 96 Stat. 1697, set out as a 
note under section 1361 of this title.


                    Effective Date of 1976 Amendment

    Amendment by section 1901(a)(16) of Pub. L. 94-455 applicable with 
respect to taxable years beginning after Dec. 31, 1976, see section 
1901(d) of Pub. L. 94-455, set out as a note under section 2 of this 
title.
    Amendment by section 1906(b)(13)(A) of Pub. L. 94-455 effective Feb. 
1, 1977, see section 1906(d)(1) of Pub. L. 94-455, set out as a note 
under section 6013 of this title.


                    Effective Date of 1974 Amendment

    Amendment by section 2005(c)(15) of Pub. L. 93-406 applicable only 
with respect to distributions and payments made after Dec. 31, 1973, in 
taxable years beginning after Dec. 31, 1973, see section 2005(d) of Pub. 
L. 93-406, set out as a note under section 402 of this title.
    Amendment by section 2007(b)(3) of Pub. L. 93-406 applicable to 
taxable years ending on or after Sept. 21, 1972, with respect to 
individuals dying on or after Sept. 21, 1972, see section 2007(c) of 
Pub. L. 93-406, set out as a note under section 122 of this title.


                    Effective Date of 1969 Amendment

    Amendment by Pub. L. 91-172 effective Jan. 1, 1970, see section 
101(k)(1) of Pub. L. 91-172, set out as an Effective Date note under 
section 4940 of this title.


                    Effective Date of 1966 Amendment

    Amendment by Pub. L. 89-365 applicable with respect to individuals 
making an election under chapter 73 of Title 10 who died after Dec. 31, 
1965, see section 1(d) of Pub. L. 89-365, set out as an Effective Date 
note under section 122 of this title.


                    Effective Date of 1962 Amendment

    Amendment by Pub. L. 87-792 applicable to taxable years beginning 
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a note 
under section 22 of this title.


                    Effective Date of 1958 Amendment

    Amendment by Pub. L. 85-866 applicable to taxable years beginning 
after Dec. 31, 1957, see section 23(g) of Pub. L. 85-866, set out as a 
note under section 403 of this title.


           Plan Amendments Not Required Until January 1, 1998

    For provisions directing that if any amendments made by subtitle D 
[Secs. 1401-1465] of title I of Pub. L. 104-188 require an amendment to 
any plan or annuity contract, such amendment shall not be required to be 
made before the first day of the first plan year beginning on or after 
Jan. 1, 1998, see section 1465 of Pub. L. 104-188, set out as a note 
under section 401 of this title.


Flexible Premium Contracts Issued During 1984 Which Meet Requirements of 
     Section 7702 Treated as Meeting Requirements of Section 101(f)

    Flexible premium contracts issued during 1984 which meet 
requirements of section 7702 of this title treated as meeting 
requirements of subsec. (f) of this section, see section 221(b)(3) of 
Pub. L. 98-369, as added by Pub. L. 99-514, set out as a note under 
section 7702 of this title.


     Special Rules for Contracts Entered Into Before January 1, 1983

    Section 266(c)(2), (3) of Pub. L. 97-248, as amended by Pub. L. 97-
448, title III, Sec. 306(a)(13), Jan. 12, 1983, 96 Stat. 2405; Pub. L. 
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
    ``(2) Special rule for contracts entered into before january 1, 
1983.--Any contract entered into before January 1, 1983, which meets the 
requirements of section 101(f) of the Internal Revenue Code of 1986 
[formerly I.R.C. 1954] on the date which is 1 year after the date of the 
enactment of this Act [Sept. 3, 1982] shall be treated as meeting the 
requirements of such section for any period before the date on which 
such contract meets such requirements. Any death benefits paid under a 
flexible premium life insurance contract (within the meaning of section 
101(f)(3)(A) of such Code) before the date which is 1 year after such 
date of enactment [Sept. 3, 1982] shall be excluded from gross income.
    ``(3) Special rule for certain contracts.--Any contract entered into 
before January 1, 1983, shall be treated as meeting the requirements of 
subparagraph (A) of section 101(f)(1) of such Code if such contract 
would meet such requirements if section 101(f)(2)(C) of such Code were 
applied by substituting `3 percent' for `4 percent'.''

                  Section Referred to in Other Sections

    This section is referred to in sections 72, 818, 953, 6050Q, 7702, 
7702B of this title; title 40 section 484.
