Page:United States Statutes at Large Volume 68A.djvu/63

 CH. 1—NORMAL TAXES AND SURTAXES

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(2) if such amounts had been paid directly to the employee at the time they were contributed, they would not have been includible in the gross income of the employee under the law applicable at the time of such contribution. (g)

RULES FOR TRANSFEREE W H E R E TRANSFER W A S FOR V A L U E. —

Where any contract (or any interest therein) is transferred (by assignment or otherwise) for a valuable consideration, to the extent that the contract (or interest therein) does not, in the hands of the transferee, have a basis which is determined by reference to the basis in, the hands of the transferor, then— (1) for purposes of this section, only the actual value of such consideration, plus the amount of the premiums and other consideration paid by the transferee after the transfer, shall be taken into account in computing the aggregate amount of the premiums or other consideration paid for the contract; (2) for purposes of subsection (c)(1)(B), there shall be taken into account only the aggregate amount received under the contract by the transferee before the annuity starting date, to the extent that such amount was excludable from gross income under this subtitle or prior income tax laws; and (3) the annuity starting date is January 1, 1954, or the first day of the first period for which the transferee received an amount under the contract as an annuity, whichever is the later. For purposes of this subsection, the term "transferee" includes a beneficiary of, or the estate of, the transferee. (h)

O P T I O N TO R E C E IV E ANNUITY IN L I E U OF L U M P SUM.—If—

(1) a contract provides for payment of a lump sum in full discharge of an obligation under the contract, subject to an option to receive an annuity in lieu of such lump sum; (2) the option is exercised within 60 days after the day on which such lump sum first became payable; and (3) part or all of such lump sum would (but for this subsection) be includible in gross income by reason of subsection (e)(1), then, for purposes of this subtitle, no part of such lump sum shall be considered as includible in gross income at the time such lump sum first became payable. (i) JOINT AND SURVIVOR A N N U I T I E S W H E R E F I R S T ANNUITANT D I E D IN 1951, 1952, OR 1953.—Where an annuitant died after Decem-

ber 31, 1950, and before January 1, 1954, and the basis of a surviving annuitant's interest in the joint and survivor annuity contract was determinable under section 113(a)(5) of the Internal Revenue Code of 1939, then— (1) subsection (d) shall not apply with respect to such contract; (2) for purposes of this section, the aggregate amount of premiums or other consideration paid for the contract is the basis of the contract determined under such section 113(a)(5); (3) for purposes of subsection (c)(1)(B), there shall be taken into account only the aggregate amount received by the surviving annuitant under the contract before the annuity starting date, to the extent that such amount was excludable from gross income under this subtitle or prior income tax laws; and

72(i)(3)

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