• Another section that's totally new in the Senate bill is sort of a curiosity piece - Section 1035.
  • The old, seldom-noticed provision of 1035 was that the life insurance and endowment contracts that qualify for 1035 exchanges must be issued by companies taxed under Section 801, meaning life insurance companies, under Part I of Subchapter L.
  • That means that for a company that is taxed as a P&C company and sold a life insurance contract, that contract would not be eligible for the 1035 exchange.
  • That would have bothered, for instance, some companies who sold universal life out of a P&C company, taxed as a P&C sub, and executed roll-overs.
• This is something that was not noticed by very many people, I think.
  • Apparently somebody on the Senate staff noticed it.
• The new definition of 1035 says that it covers any insurance contract sold by any insurance company taxed under Subchapter L.
• The novelty of this is that it applies to all exchanges past and future, providing a total retroactive removal of any problem that might have existed in that area. So if you never noticed it but should have, you don't have to worry about it even now. Assuming that it passes.

1984 - SOA - Federal Income Tax, Society of Actuaries - 24p