26 U.S.C. § 1035 — Certain exchanges of insurance policies

Page 2280 TITLE 26—INTERNAL REVENUE CODE [§ 1034 such date, see section 206(c) of Pub. L. 88–272, set out as an Effective Date note under section 121 of this title. EFFECTIVE DATE OF 1958 AMENDMENT Amendment by Pub. L. 85–866 applicable to taxable years beginning after Dec. 31, 1953, and ending after Aug. 16, 1954, see section 1(c)(1) of Pub. L. 85–866, set out as a note under section 165 of this title. EFFECTIVE DATE OF 1956 AMENDMENT Act June 29, 1956, ch. 464, § 5(b), 70 Stat. 407, provided that: ‘‘The amendment made by this section [amending this section] shall apply with respect to taxable years ending after December 31, 1955, but only in the case of sales and exchanges of livestock after December 31, 1955.’’ SAVINGS PROVISION For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liabil- ity for tax for periods ending after Nov. 5, 1990, see sec- tion 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title. [§ 1034. Repealed. Pub. L. 105–34, title III, § 312(b), Aug. 5, 1997, 111 Stat. 839] Section, acts Aug. 16, 1954, ch. 736, 68A Stat. 306; Sept. 2, 1958, Pub. L. 85–866, title I, § 46(b), 72 Stat. 1642; Feb. 26, 1964, Pub. L. 88–272, title II, § 206(b)(4), 78 Stat. 40; Jan. 2, 1975, Pub. L. 93–597, § 6(a), 88 Stat. 1953; Mar. 29, 1975, Pub. L. 94–12, title II, § 207, 89 Stat. 32; Oct. 4, 1976, Pub. L. 94–455, title XIX, §§ 1901(a)(129), 1906(b)(13)(A), 90 Stat. 1785, 1834; May 23, 1977, Pub. L. 95–30, title I, § 102(b)(13), 91 Stat. 138; Nov. 6, 1978, Pub. L. 95–600, title IV, §§ 404(c)(5), 405(a)–(c)(1), 92 Stat. 2870, 2871; Nov. 8, 1978, Pub. L. 95–615, title II, § 206, 92 Stat. 3107; Aug. 13, 1981, Pub. L. 97–34, title I, §§ 112(b)(4), 122(a), (b), 95 Stat. 195, 197; July 18, 1984, Pub. L. 98–369, div. A, title X, § 1053(a), 98 Stat. 1045; Oct. 22, 1986, Pub. L. 99–514, title XVIII, § 1878(g), 100 Stat. 2904; Nov. 10, 1988, Pub. L. 100–647, title VI, § 6002(a), 102 Stat. 3684, related to roll- over of gain on sale of principal residence. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal applicable to sales and exchanges after May 6, 1997, with certain exceptions, see section 312(d) of Pub. L. 105–34, set out as an Effective Date of 1997 Amend- ment note under section 121 of this title. § 1035. Certain exchanges of insurance policies (a) General rules No gain or loss shall be recognized on the ex- change 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 begin- ning at a date not later than the date pay- ments 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 con- tract or for a qualified long-term care insur- ance contract; or (4) a qualified long-term care insurance con- tract 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 con- tract with an insurance company which de- pends in part on the life expectancy of the in- sured, 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 pay- able during the life of the annuitant only in installments. For purposes of the preceding sentence, a contract shall not fail to be treat- ed 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 sen- tence, 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, sub- section (a) shall not apply to any exchange hav- ing 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 sub- sections (b) and (c) of section 1031. (2) For rules relating to the basis of property ac- quired in an exchange described in subsection (a), see subsection (d) of section 1031. (Aug. 16, 1954, ch. 736, 68A Stat. 309; Pub. L. 98–369, div. A, title II, §§ 211(b)(15), 224(a), July 18, 1984, 98 Stat. 756, 776; Pub. L. 99–514, title XVIII, § 1828, Oct. 22, 1986, 100 Stat. 2851; Pub. L. 105–34, title XI, § 1131(b)(1), Aug. 5, 1997, 111 Stat. 979; Pub. L. 109–280, title VIII, § 844(b), Aug. 17, 2006, 120 Stat. 1010; Pub. L. 115–141, div. U, title IV, § 401(a)(168), Mar. 23, 2018, 132 Stat. 1192.) Editorial Notes CODIFICATION Another section 1131(b) of Pub. L. 105–34 enacted sec- tion 684 of this title. AMENDMENTS 2018—Subsec. (a)(1). Pub. L. 115–141 struck out ‘‘or’’ after semicolon at end. 2006—Subsec. (a)(1). Pub. L. 109–280, § 844(b)(3)(A), which directed amendment by inserting ‘‘or for a quali- fied long-term care insurance contract’’ before semi- colon ‘‘at the end’’, was executed by making the inser- tion before ‘‘; or’’ to reflect the probable intent of Con- gress. Subsec. (a)(2). Pub. L. 109–280, § 844(b)(3)(B), which di- rected amendment by inserting ‘‘, or (C) for a qualified long-term care insurance contract’’ before semicolon ‘‘at the end’’, was executed by making the insertion be- fore ‘‘; or’’ to reflect the probable intent of Congress. Subsec. (a)(3). Pub. L. 109–280, § 844(b)(3)(C), inserted ‘‘or for a qualified long-term care insurance contract’’ after ‘‘annuity contract’’. Page 2281 TITLE 26—INTERNAL REVENUE CODE § 1037 1 See References in Text note below. Subsec. (a)(4). Pub. L. 109–280, § 844(b)(4), added par. (4). Subsec. (b)(2). Pub. L. 109–280, § 844(b)(1), inserted at end ‘‘For purposes of the preceding sentence, a contract shall not fail to be treated as an annuity contract sole- ly because a qualified long-term care insurance con- tract is a part of or a rider on such contract.’’ Subsec. (b)(3). Pub. L. 109–280, § 844(b)(2), inserted at end ‘‘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.’’ 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, § 224(a), which di- rected the substitution of ‘‘an insurance company sub- ject 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 com- pany as defined in section 816’’ to reflect the probable intent of Congress and the earlier amendment by Pub. L. 98–369, § 211(b)(15), which substituted ‘‘as defined in section 816’’ for ‘‘as defined in section 801’’. Pub. L. 98–369, § 211(b)(15), substituted ‘‘section 816’’ for ‘‘section 801’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2006 AMENDMENT Amendment by Pub. L. 109–280 applicable to contracts issued after Dec. 31, 1996, but only with respect to tax- able years beginning after Dec. 31, 2009, and to ex- changes occurring after Dec. 31, 2009, see section 844(g)(1), (2) of Pub. L. 109–280, set out as a note under section 72 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 effective, except as oth- erwise 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 ap- plicable 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. Pub. L. 98–369, div. A, title II, § 224(b), July 18, 1984, 98 Stat. 776, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply to all ex- changes whether before, on, or after the date of the en- actment 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 [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 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. § 1036. Stock for stock of same corporation (a) General rule No gain or loss shall be recognized if common stock in a corporation is exchanged solely for common stock in the same corporation, or if preferred stock in a corporation is exchanged solely for preferred stock in the same corpora- tion. (b) Nonqualified preferred stock not treated as stock For purposes of this section, nonqualified pre- ferred stock (as defined in section 351(g)(2)) shall be treated as property other than stock. (c) Cross references (1) For rules relating to recognition of gain or loss where an exchange is not solely in kind, see sub- sections (b) and (c) of section 1031. (2) For rules relating to the basis of property ac- quired in an exchange described in subsection (a), see subsection (d) of section 1031. (Aug. 16, 1954, ch. 736, 68A Stat. 309; Pub. L. 105–34, title X, § 1014(e)(3), Aug. 5, 1997, 111 Stat. 921.) Editorial Notes AMENDMENTS 1997—Subsecs. (b), (c). Pub. L. 105–34 added subsec. (b) and redesignated former subsec. (b) as (c). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1997 AMENDMENT Amendment by Pub. L. 105–34 applicable, with certain exceptions, to transactions after June 8, 1997, see sec- tion 1014(f) of Pub. L. 105–34, set out as a note under section 351 of this title. § 1037. Certain exchanges of United States obli- gations (a) General rule When so provided by regulations promulgated by the Secretary in connection with the issue of obligations of the United States, no gain or loss shall be recognized on the surrender to the United States of obligations of the United States issued under chapter 31 of title 31 in ex- change solely for other obligations issued under such chapter. (b) Application of original issue discount rules (1) Exchanges involving obligations issued at a discount In any case in which gain has been realized but not recognized because of the provisions of subsection (a) (or so much of section 1031(b) as relates to subsection (a) of this section), to the extent such gain is later recognized by reason of a disposition or redemption of an obligation received in an exchange subject to such provi- sions, the first sentence of section 1271(c)(2) 1 shall apply to such gain as though the obliga- tion disposed of or redeemed were the obliga- tion surrendered to the Government in the ex- change rather than the obligation actually disposed of or redeemed. For purposes of this paragraph and subpart A of part V of sub- chapter P, if the obligation surrendered in the exchange is a nontransferable obligation de- scribed in subsection (a) or (c) of section 454— (A) the aggregate amount considered, with respect to the obligation surrendered, as or- dinary income shall not exceed the dif- ference between the issue price and the stat- ed redemption price which applies at the time of the exchange, and