SERVICE TO RULE ON 'SELF-INSURED' LIFE AND SURVIVOR BENEFIT PLANS; LIQUIDATIONS OF LIFE INSURANCE COMPANIES ALSO OPEN TO RULINGS.

Rev. Proc. 89-36

SECTION 1. PURPOSE

Section 5 of Rev. Proc. 89-3, 1989-1 I.R.B. 29, contains a list of those areas of the Internal Revenue Code under the jurisdiction of the Associate Chief Counsel (Technical) in which advance rulings or determination letters will not be issued because the matter is under extensive study. This revenue procedure modifies Rev. Proc. 89-3 by deleting section 5.04, 5.10, 5.11, 5.12, 5.18, 5.19, 5.20, 5.21, 5.22, and 5.23. Section 5.04 concerns the treatment of proceeds received by a beneficiary from a "self-insured" life and survivor benefit plan established through a trust qualified under section 501(c)(9) of the Code as to whether such proceeds are excludable from the beneficiary's gross income as amounts paid by reason of death of the insured under section 101(a). Section 5.10, 5.11, 5.12, 5.18, 5.19, 5.20, 5.21, 5.22, and 5.23 concern the tax treatment of stock- purchase/liquidation transactions involving life insurance companies.

SEC. 2. BACKGROUND

The following paragraphs under section 5 of Rev. Proc. 89-3 were designated as areas under extensive study in which rulings or determination letters will not be issued:

04 Section 101 -- Certain Death Benefits -- Whether proceeds of "self-insured" life and survivor benefit plans established through a trust qualified under section 501(c)(9) of the Code are excludable from the beneficiary's gross income as amounts paid by reason of the death of the insured under section 101(a).

10 Section 334(b)(2) (pre-TEFRA). -- Liquidation of Subsidiary. -- Whether an acquiring corporation may treat the life insurance reserves received in liquidation as unsecured liabilities assumed.

11 Section 336 (pre-TEFRA). -- Distribution of Property in Liquidation. -- Whether the liquidation of a life insurance subsidiary is a termination pursuant to section 815(d)(2) as in effect before the enactment of the Tax Reform Act of 1984.

12 Section 338 (pre-TEFRA section 334(b)(2)). -- Certain Stock Purchases Treated as Asset Acquisitions. -- The tax consequences, under subchapter L, from the stock purchase and the deemed purchase of assets of a life insurance subsidiary.

18 Section 801(b). -- Life Insurance Company Taxable Income Defined. -- Whether the liquidation of a life insurance subsidiary pursuant to either section 334(b)(2) (pre-TEFRA) or section 338 (added by TEFRA) is a termination under section 815(d)(2) (as in effect before the Tax Reform Act of 1984) causing a distribution from the subsidiary's policyholders surplus account.

19 Section 805(a)(8). -- Other Deductions. -- Whether a portion of the purchase price of the stock of the life insurance subsidiary is properly allocable to insurance in force.

20 Section 811(b)(34). -- Amortization of Premium and Accrual of Discount -- Exception. -- Whether the difference between the face value of bonds held by a life insurance subsidiary liquidating under section 334(b)(2) (pre-TEFRA) or section 338 (added by TEFRA) and the amount allocable to such bonds pursuant to the liquidation is market discount and need not be accrued.

21 Section 815(d)(2) as in effect before the enactment of the Tax Reform Act of 1984 -- Termination as Life Insurance Company. -- Whether the liquidation of a life insurance subsidiary pursuant to section 334(b)(2) (pre-TEFRA) or section 338 (added by TEFRA) is a termination requiring the application of section 801(c) or section 802(b)(3) as in effect before the enactment of the Tax Reform Act of 1984.

22 Section 816(b). -- Life Insurance Reserves Defined. -- Whether the life insurance reserves acquired in the liquidation of a life insurance subsidiary qualify as unsecured liabilities assumed by the acquiring corporation for purposes of section 334(b)(2) (pre- TEFRA) and section 338 (added by TEFRA).

23 Section 818(b). -- Treatment of Capital Gains and Losses, etc. -- Whether the purchase of the stock of a life insurance subsidiary and its subsequent liquidation under section 334(b)(2) (pre-TEFRA) or section 338 (added by TEFRA) is, in fact, a purchase of the subsidiary's insurance contracts.

SEC. 3. PROCEDURE

Because the above-cited areas are no longer under study, the Internal Revenue Service will now rule on issues involving these areas.

Rev. Proc. 89-3 is modified by deleting section 5.04, 5.10, 5.11, 5.12, 5.18, 5.19, 5.20, 5.21, 5.22 and 5.23.

SEC. 4. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 89-3 is modified.

SEC. 5. EFFECTIVE DATE

This revenue procedure is effective May 30, 1989, the date of its publication in the Internal Revenue Bulletin.

DRAFTING INFORMATION

The principal author of this revenue procedure is Katherine A. Hossofsky of the Office of Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this revenue procedure contact Katherine A. Hossofsky on (202) 566-3458 (not a toll-free call).