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PUBLIC LAW 89-365-MAR. 8, 1966

[80 STAT.

Public Law 89-365 March 8, 1966 [H. R. 10625]

Uniformed services. Family protection plan, tax treatment. 78 Stat. 38. 26 USC 101-122.

AN ACT Relating to the tax treatment of certain amounts paid to certain members and former members of the uniformed services and to their survivors.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a)(1) part III of subchapter B of chapter 1 of the Internal Revenue Code of 1954 (relating to items specifically excluded from gross income) is amended by redesignating section 122 as section 123, and by inserting after section 121 the following new section: "SEC. 122. CERTAIN REDUCED UNIFORMED SERVICES RETIREMENT PAY. " (a) GENERAL RULE. — I n the case of a member or former member

70A Stat. 109. 10 USC 14311446.

of the uniformed services of the United States who has made an election under chapter 73 of title 10 of the United States Code to receive a reduced amount of retired or retainer pay, gross income does not include the amount of any reduction after December 31, 1965, in his retired or retainer pay by reason of such election. "(b)

68A Stat. 20; 76 Stat. 8 2 1.

70A Stat. 110.

SPECIAL RULE. — "(1) AMOUNT EXCLUDED FROM GROSS INCOME.—In the case of

any individual referred to in subsection (a), all amounts received after December 31, 1965, as retired or retainer pay shall be excluded from gross income until there has been so excluded an amount equal to the consideration for the contract. The preceding sentence snail apply only to the extent that the amounts received would, but for such sentence, be includible in gross income. " (2) CONSIDERATION FOR THE CONTRACT.—For purposes of paragraph (1) and section 72(o), the term 'consideration for the contract' means, in respect of, any individual, the sum of— " (A) the total amount of the reductions before January 1, 1966, in his retired or retainer pay by reason of an election under chapter 73 of title 10 of the United States Code,-and " (B) any amounts deposited at any time by him pursuant to section 1438 of such title 10." ,(2) The table of sections for such part III is amended by striking out the item relating to section 122 and inserting in lieu thereof the following: "Sec. 122. Certain reduced uniformed services retirement pay. "Sec. 123. Cross references to other Acts."

(b) Section 72 of such Code (relating to tax treatment of annuities) is amended by redesigiiating subsection (o) as subsection (p), and by inserting after subsection (n) the following new subsection: "(o) ANNUITIES UNDER RETIRED SERVICEMAN'S FAMILY PROTECTION

Supra-

68A Stat. 27.

PLAN.—Subsections (b) and (d) shall not apply in the case of amounts received after December 31, 1965, as an annuity under chapter 73 of title 10 of the United States Code, but all such amounts shall be excluded from gross income until there has been so excluded (under section 122(b)(1) or this section, including amounts excluded before January 1, 1966) an amount equal to the consideration for the contract (as defined by section 122(b)(2)), plus any amount treated pursuant to section 1 0 1 (b)(2)(D) as additional consideration paid by the employee. Thereafter all amounts so received shall be included in gross income." (c) Section 101(b)(2)(D) of such Code (relating to special rules for employees' death benefits) is amended by adding at the end thereof the following new sentence: "Paragraph (1) shall not apply in, the case of an annuity under chapter 73 of title 10 of the United States Code if

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