SECTION 4. REQUEST FOR

COMMENTS

.01 In general . The Service requests comments on the proposed safe harbor described in Section 3 of this notice.

.02 Other matters . Comments are requested concerning additional issues that may arise in situations where a life insurance contract matures after the insured has attained age 100. For example—

(a) If an individual who already has attained age 100 purchases a contract that is a life insurance contract under the applicable state or foreign law, do the computational rules of § 7702(e) prevent the contract from qualifying as a life insurance contract for federal income tax purposes?

(b) If a preexisting contract actually matures at age 100, such that the cash surrender value and death benefit under the contract are the same, is the insured taxed at that time on the maturity value of the contract under the doctrine of constructive receipt?

(c) If a preexisting contract actually matures at age 100, such that the cash surrender value and the death benefit are the same, is an amount later received under the

date the insured attains age 95 and the date the insured attains age 100. The 2001 Maturity Age Task Force of the Taxation Section of the Society of Actuaries has proposed a series of recommendations to comply with the requirements of §§ 7702 and 7702A in a manner that is actuarially sound. See 2001 CSO Implementation Under IRC Sections 7702 and 7702A, 2 Taxing Times 23 (May 2006). The proposed safe harbor in section 3 of this notice is drawn from that proposal, with modifications. Section 4 of this notice requests comments on the proposed safe harbor.

.09 In addition to the application of the definitional rules of §§ 7702 and 7702A, other issues arise with regard to contracts that, by their terms, mature while the insured is still alive. For example, a contract that matures at age 100 may have a cash value equal to the contract’s death benefit. Pre–1984 federal tax case law, however, requires that a life insurance contract involve “risk shifting” in order to qualify as such for federal income tax purposes. See, e.g., Helvering v. Le Gierse, 312 U.S. 531 (1941) (even though a contract is in the form of a life insurance contract, it is not treated as such for federal income tax purposes unless the requirements of risk shifting and risk distribution are met); Evans v. Commissioner, 56 T.C. 1142 (1971) (contracts that previously qualified as life insurance contracts were not so treated where the cash surrender value of the contracts exceeded their face amount). Moreover, even if such a contract were to satisfy the definition of a life insurance contract under the literal terms of § 7702, the fact that the contract has fully matured may affect the treatment of the holder of the contract under the doctrine of constructive receipt, or may affect the treatment of a beneficiary under the contract if amounts are received not by reason of the death of the insured, but by reason of the insured’s attainment of age 100. Section 4 requests comments on these issues as well.