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INTERNAL REVENUE CODE OF 1954
decree, instrument, or agreement shall not be treated as periodic payments. (2) W H E R E PERIOD FOR PAYMENT I S MORE THAN lo YEARS.—-If,
by the terms of the decree, instrument, or agreement, the principal sum referred to in paragraph (1) is to be paid or may be paid over a period ending more than 10 years from the date of such decree, instrument, or agreement, then (notwithstanding paragraph (1)) the installment payments shall be treated as periodic payments for purposes of subsection (a), but (in the case of any one taxable year of the wife) only to the extent of 10 percent of the principal sum. For purposes of the preceding sentence, the part of any principal sum which is allocable to a period after the taxable year of the wife in which it is received shall be treated as an installment payment for the taxable year in which it is received. (d) RULE FOR HUSBAND IN C A S E OF TRANSFERRED PROPERTY. —
The husband's gross income does not include amounts received which, under subsection (a), are (1) includible in the gross income of the wife, and (2) attributable to transferred property. (e) C R O S S R E F E R E N C E S. —
(1) For definitions of "husband" and "wife", see section 7701(a) (17). (2) For deduction by husband of periodic payments not attributable to transferred property, see section 215. (3) For taxable status of income of an estate or trust in case of divorce, etc., see section 682. SEC. 72. ANNUITIES; CERTAIN PROCEEDS OF ENDOWMENT AND LIFE INSURANCE CONTRACTS. (a) GENERAL RULE FOR ANNUITIES.—Except as otherwise provided
in this chapter, gross income includes any amount received as an annuity (whether for a period certain or during one or more lives) under an annuity, endowment, or life insurance contract. (b) EXCLUSION RATIO.—Gross income does not include that part of any amount received as an annuity under an annuity, endowment, or life insurance contract which bears the same ratio to such amount as the investment in the contract (as of the annuity starting date) bears to the expected return under the contract (as of such date). This subsection shall not apply to any amount to which subsection (d)(1) (relating to certain employee annuities) applies. (c) DEFINITIONS. — (1) INVESTMENT IN THE CONTRACT.—For
purposes of subsection (b), the investment in the contract as of the annuity starting date is— (A) the aggregate amount of premiums or other consideration paid for the contract, minus (B) the aggregate amount received under the contract before such date, to the extent that such amount was excludable from gross income under this subtitle or prior income tax laws. (2) ADJUSTMENT IN INVESTMENT WHERE FEATURE.—If—
THERE
I S REFUND
(A) the expected return under the contract depends in whole or in part on the life expectancy of one or more individuals; (B) the contract provides for payments to be made to a beneficiary (or to the estate of an annuitant) on or after the death of the annuitant or annuitants; and § 71(c)(1)
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