IRC Section 1035

Section 1035. Certain exchanges of insurance policies

    (a) General rules

      No gain or loss shall be recognized on the exchange of -

        (1) a contract of life insurance for another contract of life

      insurance or for an endowment or annuity contract or for a 

      qualified long-term care insurance contract;

        (2) a contract of endowment insurance (A) for another contract

      of endowment insurance which provides for regular payments

      beginning at a date not later than the date payments would have

      begun under the contract exchanged, or (B) for an annuity

      contract, or (C) for a qualified long-term care insurance contract;

        (3) an annuity contract for an annuity contract or for a

      qualified long-term care insurance contract; or

        (4) a qualified long-term care insurance contract for a 

      qualified long-term care insurance contract.

    (b) Definitions

      For the purpose of this section -

      (1) Endowment contract

        A contract of endowment insurance is a contract with an

      insurance company which depends in part on the life expectancy of

      the insured, but which may be payable in full in a single payment

      during his life.

      (2) Annuity contract

        An annuity contract is a contract to which paragraph (1)

      applies but which may be payable during the life of the annuitant

      only in installments. For purposes of the preceding sentence, a 

      contract shall not fail to be treated as an annuity contract 

      solely because a qualified long-term care insurance contract 

      is a part of or a rider on such contract.

      (3) Life insurance contract

        A contract of life insurance is a contract to which paragraph

      (1) applies but which is not ordinarily payable in full during

      the life of the insured. For purposes of the preceding sentence, 

      a contract shall not fail to be treated as a life insurance 

      contract solely because a qualified long-term care insurance 

      contract is a part of or a rider on such contract.

    (c) Exchanges involving foreign persons

      To the extent provided in regulations, subsection (a) shall not

    apply to any exchange having the effect of transferring property to

    any person other than a United States person.

    (d) Cross references

          (1) For rules relating to recognition of gain or loss where

        an exchange is not solely in kind, see subsections (b) and (c)

        of section 1031.

          (2) For rules relating to the basis of property acquired in

        an exchange described in subsection (a), see subsection (d) of

        section 1031.


AMENDMENTS

2006 - Pension Protection Act of 2006

Section 844(b) Tax-Free Exchanges Among Certain Insurance Policies.--

            (1) Annuity contracts can include qualified long-term care 

        insurance riders.--Paragraph (2) of section 1035(b) of such Code 

        is amended by adding at the end the following new sentence: 

        ``For purposes of the preceding sentence, a contract shall not 

        fail to be treated as an annuity contract solely because a 

        qualified long-term care insurance contract is a part of or a 

        rider on such contract.''.

            (2) Life insurance contracts can include qualified long-term 

        care insurance riders.--Paragraph (3) of section 1035(b) of such 

        Code is amended by adding at the end the following new sentence: 

        ``For purposes of the preceding sentence, a contract shall not 

        fail to be treated as a life insurance contract solely because 

        a qualified long-term care insurance 

        contract is a part of or a rider on such contract.''.

            (3) Expansion of tax-free exchanges of life insurance, 

        endowment, and annuity contracts for long-term care contracts.--

        Subsection (a) of section 1035 of such <<NOTE: 26 USC 

        1035.>> Code (relating to certain exchanges of insurance 

        policies) is amended--

                    (A) in paragraph (1) by inserting ``or for a 

                qualified long-term care insurance contract'' before the 

                semicolon at the end,

                    (B) in paragraph (2) by inserting ``, or (C) for a 

                qualified long-term care insurance contract'' before the 

                semicolon at the end, and

                    (C) in paragraph (3) by inserting ``or for a 

                qualified long-term care insurance contract'' before the 

                period at the end.

            (4) Tax-free exchanges of qualified long-term care insurance 

        contract.--Subsection (a) of section 1035 of such Code (relating 

        to certain exchanges of insurance policies) is amended by 

        striking ``or'' at the end of paragraph (2), by striking the 

        period at the end of paragraph (3) and inserting ``; or'', and 

        by inserting after paragraph (3) the following new paragraph:

            ``(4) a qualified long-term care insurance contract for a 

        qualified long-term care insurance contract.''.

 

      1997 - Subsecs. (c), (d). Pub. L. 105-34 added subsec. (c) and

    redesignated former subsec. (c) as (d).

      1986 - Subsec. (b)(1). Pub. L. 99-514 struck out ''subject to tax

    under subchapter L'' after ''with an insurance company''.

      1984 - Subsec. (b)(1). Pub. L. 98-369, Sec. 224(a), which

    directed the substitution of ''an insurance company subject to tax

    under subchapter L'' for ''a life insurance company as defined in

    section 801'', was executed by making such substitution for ''a

    life insurance company as defined in section 816'' to reflect the

    probable intent of Congress and the earlier amendment by Pub. L.

    98-369, Sec. 211(b)(15), which substituted ''as defined in section

    816'' for ''as defined in section 801''.

      Pub. L. 98-369, Sec. 211(b)(15), substituted ''section 816'' for

    ''section 801''.

                      EFFECTIVE DATE OF 1986 AMENDMENT

      Amendment by Pub. L. 99-514 effective, except as otherwise

    provided, as if included in the provisions of the Tax Reform Act of

    1984, Pub. L. 98-369, div.  A, to which such amendment relates, see

    section 1881 of Pub. L. 99-514, set out as a note under section 48

    of this title.

                      EFFECTIVE DATE OF 1984 AMENDMENT

      Amendment by section 211(b)(5) of Pub. L. 98-369 applicable to

    taxable years beginning after Dec. 31, 1983, see section 215 of

    Pub. L. 98-369, set out as an Effective Date note under section 801

    of this title.

      Section 224(b) of Pub. L. 98-369 provided that: ''The amendment

    made by subsection (a) (amending this section) shall apply to all

    exchanges whether before, on, or after the date of the enactment of

    this Act (July 18, 1984).''

             PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989

      For provisions directing that if any amendments made by subtitle

    A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177) or title

    XVIII (Sec. 1800-1899A) of Pub. L. 99-514 require an amendment to

    any plan, such plan amendment shall not be required to be made

    before the first plan year beginning on or after Jan. 1, 1989, see

    section 1140 of Pub. L. 99-514, as amended, set out as a note under

    section 401 of this title.


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