IRS Safe Harbor proposal needs revising, say industry groups.(Valuation Of Life Insurance)(Internal Revenue Service)

National Underwriter Life & Health-Financial Services Edition, June, 2004 by Brostoff, Steven

A SAFE HARBOR FOR THE valuation of life insurance contracts proposed by the Internal Revenue Service has numerous shortcomings and should be revised, industry representatives say.

While generally agreeing it is appropriate for the IRS to establish a safe harbor establishing the fair market value of life insurance policies for tax purposes, both agent and company representatives say modifications in the proposed IRS formula are needed.

The comments were made during an IRS hearing on proposed regulations that were issued on Feb. 13, 2004, in conjunction with Section 412(i) plans and which require life insurance contracts be valued at fair market value.

One part of the proposed regulations establishes a new safe harbor for fair market value. The...

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