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PUBLIC LAW 100-647—NOV. 10, 1988
102 STAT. 3661
ence, if any, with respect to similar contracts) are reasonably expected to be actually paid, and". (b) SPECIAL RULES.—Paragraph (3) of section 7702(c) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: (D) SPECIAL RULES FOR SUBPARAGRAPH (B)(ii)-— "(i) CHARGES NOT SPECIFIED IN THE CONTRACT.—If any
charge is not specified in the contract, the amount taken into account under subparagraph (B)(ii) for such charge shall be zero. "(ii) N E W COMPANIES, ETC.—If any company does not have adequate experience for purposes of the determination under subparagraph (B)(ii), to the extent provided in regulations, such determination shall be made on the basis of the industry-wide experience." (c) INTERIM RULES.— (1) REGULATIONS.—Not later than January 1, 1990, the Secretary of the Treasury (or his delegate) shall issue regulations under section 7702(c)(3)(B)(i) of the 1986 Code (as amended by subsection (a)). (2) STANDARDS BEFORE REGULATIONS TAKE EFFECT.—In the case of any contract to which the amendments made by this section apply and which is issued before the effective date of the regulations required under paragraph (1), mortality charges which do not differ materially from the charges actually expected to be imposed by the company (taking into account any relevant characteristic of the insured of which the company is aware) shall be treated as meeting the requirements of clause (i) of section 7702(c)(3)(B) of the 1986 Code (as amended by subsection (a)). (d) EFFECTIVE DATE.—The amendments made by this section shall apply to contracts entered into on or after October 21, 1988. SEC. 5012. TREATMENT OF MODIFIED ENDOWMENT CONTRACTS. (a) DISTRIBUTION RULES.—
(1) IN GENERAL.—Subsection (e) of section 72 of the 1986 Code (relating to amounts not received as annuities) is amended by adding at the end thereof the following new paragraph: "(10) TREATMENT OF MODIFIED ENDOWMENT CONTRACTS.—
"(A) IN GENERAL.—Notwithstanding paragraph (5)(C), in the case of any modified endowment contract (as defined in section 7702A)— "(i) paragraphs (2)(B) and (4)(A) shall apply, and "(ii) in applying paragraph (4)(A), 'any person' shall be substituted for 'an individual'. "(B)
TREATMENT OF CERTAIN BURIAL CONTRACTS.—Not-
withstanding subparagraph (A), paragraph (4)(A) shall not apply to any assignment (or pledge) of a modified endowment contract if such assignment (or pledge) is solely to cover the payment of expenses referred to in section 7702(e)(2)(C)(iii) and if the maximum death benefit under such contract does not exceed $25,000," (2) TECHNICAL AMENDMENT.—Subparagraph (C) of section 72(e)(5) of the 1986 Code is amended by striking out "Except to the extent" and inserting in lieu thereof "Except as provided in paragraph (10) and except to the extent". (b) ADDITIONAL TAX.—
26 USC 7702 note,
26 USC 7702 note.
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