Page:United States Statutes at Large Volume 102 Part 4.djvu/695

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3665

"(A) IN GENERAL.—For purposes of determining the amount includible in gross income under this subsection— "(i) all modified endowment contracts issued by the same company to the same policyholder during any 12month period shall be treated as 1 modified endowment contract, and "(ii) all annuity contracts issued by the same company to the same policyholder during any 12-month period shall be treated as 1 annuity contract. "(B)

REGULATORY AUTHORITY.—The Secretary may

by

regulations prescribe such additional rules as may be necessary or appropriate to prevent avoidance of the purposes of this subsection through serial purchases of contracts or otherwise." (e) EFFECTIVE DATES.— (1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to contracts entered into on or after June 21, 1988. (2) SPECIAL RULE WHERE DEATH BENEFIT INCREASES BY MORE

THAN $150,000.—If the death benefit under the contract increases by more than $150,000 over the death benefit under the contract in effect on October 20, 1988, the rules of section 7702A(c)(3) of the 1986 Code (as added by this section) shall apply in determining whether such contract is issued on or after June 21, 1988. The preceding sentence shall not apply in the case of a contract which, as of June 21, 1988, required at least 7 level annual premium payments and under which the policyholder continues to make level annual premium payments over the life of the contract. (3) CERTAIN OTHER MATERIAL CHANGES TAKEN INTO ACCOUNT.—

A contract entered into before June 21, 1988, shall be treated as entered into after such date if— (A) on or after June 21, 1988, the death benefit under the contract is increased (or a qualified additional benefit is increased or added) and before June 21, 1988, the owner of the contract did not have a unilateral right under the contract to obtain such increase or addition without providing additional evidence of insurability, or (B) the contract is converted after June 20, 1988, from a term life insurance contract to a life insurance contract providing coverage other than term life insurance coverage without regard to any right of the owner of the contract to such conversion. (4) CERTAIN EXCHANGES PERMITTED.—In the case of a modified endowment contract which— (A) required at least 7 annual level premium payments, (B) is entered into after June 20, 1988, and before the date of the enactment of this Act, and (C) is exchanged within 3 months after such date of enactment for a life insurance contract which meets the requirements of section 7702A(b), the contract which is received in exchange for such contract shall not be treated as a modified endowment contract if the taxpayer elects, notwithstanding section 1035 of the 1986 Code, to recognize gain on such exchange.

26 USC 7702A note.

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