Page:United States Statutes at Large Volume 100 Part 3.djvu/1040

 100 STAT. 2848

PUBLIC LAW 99-514—OCT. 22, 1986

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in subparagraph (B) occurs after the 5-year period referred to under subparagraph (C), the recapture ceiling is the excess of the cash surrender value of the contract, immediately before the reduction, over the cash value corridor of subsection (d) (determined immediately after the reduction and whether or not subsection (d) applies to the contract). "(E)

TREATMENT OF CERTAIN DISTRIBUTIONS MADE IN

ANTICIPATION OF BENEFIT REDUCTIONS.—Under regulations prescribed by the Secretary, subparagraph (B) shall apply also to any distribution made in anticipation of a reduction in benefits under the contract. For purposes of the preceding sentence, appropriate adjustments shall be made in the provisions of subparagraphs (C) and (D); and any distribution which reduces the cash surrender value of a contract and which is made within 2 years before a reduction in benefits under the contract shall be treated as made in anticipation of such reduction." (2) Subparagraph (A) of section 7702(0(1) (defining premiums paid) is amended by striking out "less any other amounts received" and inserting in lieu thereof "less any excess premiums with respect to which there is a distribution described in subparagraph (B) or (E) of paragraph (7) and any other amounts received'. (c) CLARIFICATION OF TREATMENT OF CONTRACTS WHICH DO NOT

MEET TEST.—Clause (ii) of section 7702(g)(l)(B) (defining income on the contract) is amended to read as follows: "(ii) the premiums paid (as defined in subsection (f)(D) under the contract during the taxable year." (d) TREATMENT OF FLEXIBLE PREMIUM CONTRACTS ISSUED DURING 1984 WHICH MEET N E W REQUIREMENTS.—Subsection (b) of section

221 of the Tax Reform Act of 1984 (relating to 1-year extension of flexible premium contract provisions) is amended by adding at the end thereof the following new paragraph: "(3) TRANSITIONAL RULE.—Any flexible premium contract issued during 1984 which meets the requirements of section 7702 of the Internal Revenue Code of 1954 (as added by this section) shall be treated as meeting the requirements of section 101(f) of such Code." (e) TREATMENT OF CERTAIN CONTRACTS ISSUED BEFORE OCTOBER 1,

1984.—Clause (i) of section 221(d)(2)(C) of the Tax Reform Act of 1984 (relating to certain contracts issued before October 1, 1984) is amended— (1) by striking out "in clause (i) thereof in the material preceding subclause (I), and (2) by striking out "any mortality charges" in subclause (I) and inserting in lieu thereof "any mortality charges and any initial excess interest guarantees". SEC. 1826. AMENDMENTS RELATED TO SECTION 222 OF THE ACT. (a) EXCEPTION FOR ANNUITY CONTRACTS WHICH ARE PART OF QUALIFIED PLANS.—Subsection (s) of section 72 (relating to required

distributions where holder dies before entire interest is distributed) is amended by adding at the end thereof the following new paragraph: "(5) EXCEPTION FOR ANNUITY CONTRACTS WHICH ARE PART OF

QUALIFiED PLANS.—This subsection shall not apply to any annuity contract—

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