C H. 1—NORMAL TAXES AND SURTAXES
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(b) EMPLOYEES' D E A T H B E N E F I T S. — (1) GENERAL RULE.—Gross income does not include
amounts received (whether in a single sum or otherwise) by the beneficiaries or the estate of an employee, if such amounts are paid by or on behalf of an employer and are paid by reason of the death of the employee. (2) SPECIAL RULES FOR PARAGRAPH (i).—
(A) $5,000 LIMITATION.—The aggregate amounts excludable under paragraph (1) with respect to the death of any employee shall not exceed $5,000. (B) NONFORFEITABLE RIGHTS.—Paragraph (1) shall not apply to amounts with respect to which the employee possessed, immediately before his death, a nonforfeitable right to receive the amounts while living (other than total distributions payable, as defined in section 402(a)(3), which are paid to a distributee, by a stock bonus, pension, or profit-sharing trust described in section 401(a) which is exempt from tax under section 501(a), or under an annuity contract under a plan which meets the requirements of paragraphs (3), (4), (5), and (6) of section 401 (a), within one taxable year of the distributee by reason of the employee's death). (C) JOINT AND SURVIVOR ANNUITIES.—Paragraph ^ (1) shall not apply to amounts received by a surviving annuitant under a jQ joint and survivor's annuity contract after the first day of the first period for which an amount was received as an annuity by the employee (or would have been received if the employee had -rn lived). (D) OTHER ANNUITIES.—In the case of any amount to which section 72 (relating to annuities, etc.) applies, the amount which is excludable under paragraph (1) (as modified by the preceding subparagraphs of this paragraph) shall be determined by reference to the value of such amount as of the day on which the employee died. Any amount so excludable under paragraph (1) shall, for purposes of section 72, be treated as additional consideration paid by the employee. (c) INTEREST.—If any amount excluded from gross income by subsection (a) or (b) is held under an agreement to pay interest thereon, the interest payments shall be included in gross income. (d) PAYMENT OF L I F E INSURANCE PROCEEDS AT A D A T E LATER THAN DEATH.— r (1) GENERAL RULE.—The amounts held by an insurer with
respect to any beneficiary shall be prorated (in accordance with such regulations as may be prescribed by the Secretary or his delegate) over the period or periods with respect to which such payments are to be made. There shall be excluded from the gross income of such beneficiary in the taxable year received— (A) any amount determined by such proration, and (B) in the case of the surviving spouse of the insured, that portion of the excess of the amounts received under one or more agreements specified in paragraph (2)(A) (whether or not payment of any part of such amounts is guaranteed by the insurer) '. over the amount determined in subparagraph (A) of this para_
§ 101(d)(1)(B)
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