1.Tax reporting for life
settlement transactions
(a)Subpart B of part III
of subchapter A of chapter 61 of the Internal Revenue Code of 1986 is amended
by adding at the end the following new section:
6050X.Returns
relating to certain life insurance contract transactions
(a)Requirement of
reporting of certain payments
(1)Every person who acquires a life insurance contract or
any interest in a life insurance contract in a reportable policy sale during
any taxable year shall make a return for such taxable year (at such time and in
such manner as the Secretary shall prescribe) setting forth—
(A)the name,
address, and TIN of such person,
(B)the name,
address, and TIN of each recipient of payment in the reportable policy
sale,
(C)the date of such
sale,
(D)the name of the
issuer of the life insurance contract sold and the policy number of such
contract, and
(E)the amount of
each payment.
(2)Statement to be
furnished to persons with respect to whom information is
requiredEvery person required to make a return under this
subsection shall furnish to each person whose name is required to be set forth
in such return a written statement showing—
(A)the name,
address, and phone number of the information contact of the person required to
make such return, and
(B)the information
required to be shown on such return with respect to such person, except that in
the case of an issuer of a life insurance contract, such statement is not
required to include the information specified in paragraph (1)(E).
(b)Requirement of
reporting of seller's basis in life insurance contracts
(1)Upon receipt of the statement required under subsection
(a)(2) or upon notice of a transfer of a life insurance contract to a foreign
person, each issuer of a life insurance contract shall make a return (at such
time and in such manner as the Secretary shall prescribe) setting forth—
(A)the name,
address, and TIN of the seller who transfers any interest in such contract in
such sale,
(B)the investment in
the contract (as defined in section 72(e)(6)) with respect to such seller,
and
(C)the policy number
of such contract.
(2)Statement to be
furnished to persons with respect to whom information is
requiredEvery person required to make a return under this
subsection shall furnish to each person whose name is required to be set forth
in such return a written statement showing—
(A)the name,
address, and phone number of the information contact of the person required to
make such return, and
(B)the information
required to be shown on such return with respect to each seller whose name is
required to be set forth in such return.
(c)Requirement of
reporting with respect to reportable death benefits
(1)Every person who makes a payment of reportable death
benefits during any taxable year shall make a return for such taxable year (at
such time and in such manner as the Secretary shall prescribe) setting
forth—
(A)the name,
address, and TIN of the person making such payment,
(B)the name,
address, and TIN of each recipient of such payment,
(C)the date of each
such payment, and
(D)the amount of
each such payment.
(2)Statement to be
furnished to persons with respect to whom information is
requiredEvery person required to make a return under this
subsection shall furnish to each person whose name is required to be set forth
in such return a written statement showing—
(A)the name,
address, and phone number of the information contact of the person required to
make such return, and
(B)the information
required to be shown on such return with respect to each recipient of payment
whose name is required to be set forth in such return.
(d)For
purposes of this section:
(1)The
term payment means the amount of cash and the fair market value of
any consideration transferred in a reportable policy sale.
(2)The term reportable policy sale has the
meaning given such term in section 101(a)(3)(B).
(3)The
term issuer means any life insurance company that bears the risk
with respect to a life insurance contract on the date any return or statement
is required to be made under this section.
(4)Reportable
death benefitsThe term reportable death benefits
means amounts paid by reason of the death of the insured under a life insurance
contract that has been transferred in a reportable policy
sale.
.
(b)The table of sections for subpart B of part III of
subchapter A of chapter 61 of the Internal Revenue Code of 1986 is amended by
inserting after the item relating to section 6050W the following new
item:
Sec. 6050X. Returns relating to
certain life insurance contract
transactions.
.
(c)
(1)Subsection (d) of
section 6724 of the Internal Revenue Code of 1986 is amended—
(A)by striking
or
at the end of clause (xxiv) of paragraph (1)(B), by striking
and
at the end of clause (xxv) of such paragraph and inserting
or
, and by inserting after such clause (xxv) the following new
clause:
(xxvi)section 6050X
(relating to returns relating to certain life insurance contract transactions),
and
,
and
(B)by striking
or
at the end of subparagraph (GG) of paragraph (2), by striking
the period at the end of subparagraph (HH) of such paragraph and inserting
, or
, and by inserting after such subparagraph (HH) the
following new subparagraph:
(II)subsection
(a)(2), (b)(2), or (c)(2) of section 6050X (relating to returns relating to
certain life insurance contract
transactions).
.
(2)Section 6047 of
such Code is amended—
(A)by redesignating
subsection (g) as subsection (h),
(B)by inserting
after subsection (f) the following new subsection:
(g)Information
relating to life insurance contract transactionsThis section
shall not apply to any information which is required to be reported under
section 6050X.
,
and
(C)by adding at the
end of subsection (h), as so redesignated, the following new paragraph:
(4)For provisions
requiring reporting of information relating to certain life insurance contract
transactions, see section
6050X.
.
(d)The amendments made by this section shall apply to—
(1)reportable policy
sales after December 31, 2012, and
(2)reportable death
benefits paid after December 31, 2012.
2.Clarification of
tax basis of life insurance contracts
(a)Paragraph (1) of section 1016(a) of the Internal Revenue
Code of 1986 is amended by striking subparagraph (A) and all that follows and
inserting the following:
(A)for—
(i)taxes or other
carrying charges described in section 266; or
(ii)expenditures
described in section 173 (relating to circulation expenditures),
for
which deductions have been taken by the taxpayer in determining taxable income
for the taxable year or prior taxable years; or(B)for mortality,
expense, or other reasonable charges incurred under an annuity or life
insurance
contract;
.
(b)The amendment made by this section shall apply to
transactions entered into after August 25, 2009.
3.Exception to
transfer for valuable consideration rules
(a)Subsection (a) of section 101 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
paragraph:
(3)Exception to
valuable consideration rules for commercial transfers
(A)The second sentence of paragraph (2) shall not apply in
the case of a transfer of a life insurance contract, or any interest therein,
which is a reportable policy sale.
(B)For purposes of this paragraph, the term
reportable policy sale means the acquisition of an interest in a
life insurance contract, directly or indirectly, if the acquirer has no
substantial family, business, or financial relationship with the insured apart
from the acquirer's interest in such life insurance contract. For purposes of
the preceding sentence, the term indirectly applies to the
acquisition of an interest in a partnership, trust, or other entity that holds
an interest in the life insurance
contract.
.
(b)Paragraph (1) of section 101(a) of the Internal Revenue
Code of 1986 is amended by striking paragraph (2)
and inserting
paragraphs (2) and (3)
.
(c)The amendments made by this section shall apply to transfers
after December 31, 2012.