SECTION 6. SPECIFIED TAX

DEFERRED ACCOUNTS

The mark-to-market regime does not apply to specified tax deferred accounts. Instead, section 877A(e)(1)(A) provides that if a covered expatriate holds any interest in a specified tax deferred account (defined below) on the day before the expatriation date, such covered expatriate is treated as having received a distribution of his or her entire interest in such account

on the day before the expatriation date. Within 60 days of receipt of a properly completed Form W–8CE, the custodian of a specified tax deferred account must advise the covered expatriate of the amount of the covered expatriate’s entire interest in his or her account on the day before his or her expatriation date. See section 8 of this notice for more information concerning Form W–8CE.

Section 877A(e)(1)(B) provides that no early distribution tax will apply by reason of the tax imposed by section 877A(e)(1)(A). Section 877A(g)(6) provides that the term “early distribution tax” means any increase in tax imposed under sections 72(t), 220(e)(4), 223(f)(4), 409A(a)(1)(B), 529(c)(6), or 530(d)(4). Section 877A(e)(1)(C) provides that appropriate adjustments must be made to subsequent distributions to take into account the previously taxed amount under section 877A. Thus, in the case of distributions that are taxable under the rules of section 72, the amount that the covered expatriate includes in gross income pursuant to section 877A(e)(1) will be treated as investment in the contract for purposes of section 72.

Section 877A(e)(2) provides that the term “specified tax deferred account” means an individual retirement plan (as defined in section 7701(a)(37)), a qualified tuition plan (as defined in section 529), a Coverdell education savings account (as defined in section 530), a health savings account (as defined in section 223), and an Archer MSA (as defined in section 220). However, simplified employee pensions (within the meaning of section 408(k)) and simplified retirement accounts (within the meaning of section 408(p)) of a covered expatriate are treated as deferred compensation items and not as specified tax deferred accounts. See section 5 of this notice for rules pertaining to deferred compensation items.