Internal Revenue Bulletin 2019-17 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2019–17
April 22, 2019
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
REV. PROC. 2019-17, page 1045.
This revenue procedure provides guidance regarding the
general public use requirements for qualified residential
rental projects financed with tax-exempt bonds under §
142(d) of the Internal Revenue Code. Specifically, this rev-
enue procedure coordinates these requirements with the
provisions in § 42(g)(9). Under § 42(g)(9), a project does
not violate the general public use requirement under § 42
as a result of specified occupancy restrictions or preferenc-
es (for example, certain housing preferences for military
veterans).
INCOME TAX
REV. RUL. 2019-11, page 1041.
This revenue ruling provides guidance to taxpayers regarding
the inclusion in income of recovered state and local taxes in
the current year when the taxpayer deducted state and local
taxes paid in a prior year, subject to the section 164(b)(6)
limitation.
REG-103083-18, page 1046.
The proposed regulations provide guidance on new infor-
mation reporting obligations related to reportable policy
sales of life insurance contracts and payments of report-
able death benefits under § 6050Y, which was added by
section 13520 of the Tax Cuts and Jobs Act, PL 115–97
(TCJA). The proposed regulations also provide guidance on
the amount of death benefits excluded from gross income
under § 101 following a reportable policy sale, under an
exception to the transfer for valuable consideration rules
for life insurance contracts added to § 101(a) by section
13522 of the TCJA.
REG-113943-17, page 1067.
This document withdraws a portion of a notice of proposed
rulemaking published in the Proposed Rules section of the
Federal Register on June 8, 2016. If adopted, the proposed
rules would have provided guidance for transactions in which
property of a C corporation becomes the property of a REIT
following certain corporate distributions of controlled corpora-
tion stock. This document also contains a notice of proposed
rulemaking that provides revised guidance on the same sub-
ject. These proposed regulations would affect REITs, C corpo-
rations the property of which becomes property of a REIT, and
their respective shareholders.
REG-143686-07, page 1072.
This document withdraws a notice of proposed rulemaking
published in the Proposed Rules section of the Federal Regis-
ter on January 21, 2009 with corrections published on March
5, 2009. If adopted, the proposed rules would have provided
guidance on the recovery of stock basis in distributions of
property made by a corporation to a shareholder and cer-
tain transactions treated as dividend-equivalents, as well as
guidance regarding the determination of gain and the basis
of stock or securities received in certain transactions. The
proposed regulations would affect shareholders and security
holders of corporations.
REG-124627-11, page 1073.
This is a withdrawal of a notice of proposed rulemaking (REG-
124627-11) published on December 19, 2011 in the Federal
Register (76 FR 78591).
EXEMPT ORGANIZATIONS
EXCISE TAX
T.D. 9855, page 1042.
These final regulations prescribe filing Form 4720 to report
excise tax under sections 4960, 4966, 4967, and 4968 by
the 15th day of the fifth month after the end of the tax year
of the person reporting the tax, and update the abatement
rules under section 4963 for section 4966 and 4967 taxes,
consistent with a statutory change.
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
April 22, 2019 Bulletin No. 2019–17

Part I.
Section 111.—Recovery of
Tax Benefit Items
26 CFR 1.111-1: Recovery of certain items
previously deducted or credited.
(Also: § 164; 1.164-1.)
Rev. Rul. 2019-11
ISSUE
If a taxpayer received a tax benefit
from deducting state and local taxes under
section 164 of the Internal Revenue Code
in a prior taxable year, and the taxpayer
recovers all or a portion of those taxes in
the current taxable year, what portion of
the recovery must the taxpayer include in
gross income?
FACTS
In Situations 1 through 4 below, the tax-
payers are unmarried individuals whose
filing status is “single” and who itemized
deductions on their federal income tax re-
turns for 2018 in lieu of using their stan-
dard deduction of $12,000. The taxpayers
did not pay or accrue the taxes in carry-
ing on a trade or business or an activity
described in section 212. For 2018, the
taxpayers were not subject to alternative
minimum tax under section 55 and were
not entitled to any credit against income
tax. The taxpayers use the cash receipts
and disbursements method of accounting.
Situation 1: Taxpayer A paid local real
property taxes of $4,000 and state income
taxes of $5,000 in 2018. A’s state and local
tax deduction was not limited by section
164(b)(6) because it was below $10,000.
Including other allowable itemized de-
ductions, A claimed a total of $14,000 in
itemized deductions on A’s 2018 federal
income tax return. In 2019, A received
a $1,500 state income tax refund due to
A’s overpayment of state income taxes in
2018.
Situation 2: Taxpayer B paid local real
property taxes of $5,000 and state income
taxes of $7,000 in 2018. Section 164(b)
(6) limited B’s state and local tax deduc-
tion on B’s 2018 federal income tax return
to $10,000, so B could not deduct $2,000
of the $12,000 state and local taxes paid.
Including other allowable itemized deduc-
tions, B claimed a total of $15,000 in item-
ized deductions on B’s 2018 federal income
tax return. In 2019, B received a $750 state
income tax refund due to B’s overpayment
of state income taxes in 2018.
Situation 3: Taxpayer C paid local real
property taxes of $5,000 and state income
taxes of $6,000 in 2018. Section 164(b)(6)
limited C’s state and local tax deduction
on C’s 2018 federal income tax return to
$10,000, so C could not deduct $1,000
of the $11,000 state and local taxes paid.
Including other allowable itemized de-
ductions, C claimed a total of $15,000 in
itemized deductions on C’s 2018 federal
income tax return. In 2019, C received
a $1,500 state income tax refund due to
C’s overpayment of state income taxes in
2018.
Situation 4: Taxpayer D paid local real
property taxes of $4,250 and state income
taxes of $6,000 in 2018. Section 164(b)
(6) limited D’s state and local tax deduc-
tion on D’s 2018 federal income tax return
to $10,000, so D could not deduct $250
of the $10,250 state and local taxes paid.
Including other allowable itemized de-
ductions, D claimed a total of $12,500 in
itemized deductions on D’s 2018 federal
income tax return. In 2019, D received
a $1,000 state income tax refund due to
D’s overpayment of state income taxes in
2018.
LAW AND ANALYSIS
Section 164 generally provides an
itemized deduction for certain taxes paid
or accrued during the taxable year. Section
164(a) provides a deduction for (1) state
and local, and foreign, real property taxes;
(2) state and local personal property taxes;
(3) state and local, and foreign, income,
war profits and excess profits taxes; and
(4) the generation-skipping transfer tax
imposed on income distributions. Section
164(a) also provides a deduction for state
and local, and foreign, taxes not previ-
ously described that were paid or accrued
within the taxable year in carrying on any
trade or business or an activity described
in section 212 (relating to expenses for
production of income). Section 164(b)(5)
allows a taxpayer to elect to deduct state
and local general sales taxes in lieu of
state and local income taxes.
Section 164(b)(6), as added by section
11042 of the “Tax Cuts and Jobs Act” (the
“Act”), Pub. L. 115-97, limits an individu-
al’s deduction for the aggregate amount of
state and local taxes paid during the calen-
dar year to $10,000 ($5,000 in the case of
a married individual filing a separate re-
turn). The dollar limitations apply to tax-
able years beginning after December 31,
2017, and before January 1, 2026, but they
do not apply to foreign taxes described in
section 164(a)(3) or to any taxes described
in section 164(a)(1) and (2) that are paid or
accrued in carrying on a trade or business
or an activity described in section 212.
Section 111(a) excludes from gross in-
come amounts attributable to the recovery
during the taxable year of any amount de-
ducted in any prior year to the extent the
amount did not reduce the amount of tax
imposed by Chapter 1 of the Code. Sec-
tion 111 partially codifies the tax benefit
rule, which generally requires a taxpay-
er to include in gross income recovered
amounts that the taxpayer deducted in
a prior taxable year to the extent those
amounts reduced the taxpayer’s tax liabil-
ity in the prior year. See Rev. Rul. 93-75,
1993-2 C.B. 63.
If the taxpayers in Situations 1 through
4 had paid only the proper amount of state
and local tax in the prior taxable year, their
itemized deductions may have been lower
or they may have opted for the standard de-
duction. Thus, the taxpayer in each situa-
tion must determine the amount of itemized
deductions that the taxpayer would have
deducted in the prior year had the taxpay-
er paid only the proper amount of tax. The
taxpayer must then compare this amount to
the total itemized deductions actually tak-
en on the return, or the standard deduction
that could have been taken on the return,
and include the difference as income on the
current year return if the taxpayer received
a tax benefit in the prior taxable year from
that itemized deduction.
Situation 1: State income tax refund ful-
ly includable. In 2019, A received a $1,500
refund of state income taxes paid in 2018.
Bulletin No. 2019–17 1041 April 22, 2019

Had A paid only the proper amount of state
income tax in 2018, A’s state and local tax
deduction would have been reduced from
$9,000 to $7,500 and as a result, A’s item-
ized deductions would have been reduced
from $14,000 to $12,500, a difference of
$1,500. A received a tax benefit from the
overpayment of $1,500 in state income tax
in 2018. Thus, A is required to include the
entire $1,500 state income tax refund in A’s
gross income in 2019.
Situation 2: State income tax refund
not includable. In 2019, B received a
$750 refund of state income taxes paid in
2018. Had B paid only the proper amount
of state income tax in 2018, B’s state and
local tax deduction would have remained
the same ($10,000) and B’s itemized de-
ductions would have remained the same
($15,000). B received no tax benefit from
the overpayment of $750 in state income
tax in 2018. Thus, B is not required to in-
clude the $750 state income tax refund in
B’s gross income in 2019.
Situation 3: State income tax refund
partially includable. In 2019, C received a
$1,500 refund of state income taxes paid in
2018. Had C paid only the proper amount
of state income tax in 2018, C’s state and
local tax deduction would have been re-
duced from $10,000 to $9,500 and as a
result, C’s itemized deductions would have
been reduced from $15,000 to $14,500, a
difference of $500. C received a tax ben-
efit from $500 of the overpayment of state
income tax in 2018. Thus, C is required to
include $500 of C’s state income tax refund
in C’s gross income in 2019.
Situation 4: Standard deduction. In
2019, D received a $1,000 refund of state
income taxes paid in 2018. Had D paid
only the proper amount of state income tax
in 2018, D’s state and local tax deduction
would have been reduced from $10,000
to $9,250, and, as a result, D’s itemized
deductions would have been reduced from
$12,500 to $11,750, which is less than
the standard deduction of $12,000 that D
would have taken in 2018. The difference
between D’s claimed itemized deductions
($12,500) and the standard deduction D
could have taken ($12,000) is $500. D
received a tax benefit from $500 of the
overpayment of state income tax in 2018.
Thus, D is required to include $500 of D’s
state income tax refund in D’s gross in-
come in 2019.
HOLDING
If a taxpayer received a tax benefit
from deducting state or local taxes in a
prior taxable year and the taxpayer re-
covers all or a portion of those taxes in
the current taxable year, the taxpayer
must include in gross income the lesser
of (1) the difference between the taxpay-
er’s total itemized deductions taken in
the prior year and the amount of item-
ized deductions the taxpayer would have
taken in the prior year had the taxpayer
paid the proper amount of state and lo-
cal tax or (2) the difference between the
taxpayer’s itemized deductions taken in
the prior year and the standard deduction
amount for the prior year, if the taxpayer
was not precluded from taking the stan-
dard deduction in the prior year. This
holding applies to the recovery of any
state or local tax, including state or local
income tax and state or local real or per-
sonal property tax.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Amy S. Wei of the Office of As-
sociate Chief Counsel (Income Tax & Ac-
counting). For further information regard-
ing this revenue ruling, contact Amy S. Wei
at (202) 317-7011 (not a toll-free number).

T.D. 9855
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 53
Regulations to Prescribe
Return and Time for Filing
for Payment of Section
4960, 4966, 4967, and
4968 Taxes and to Update
the Abatement Rules for
Section 4966 and 4967
Taxes
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations specifying which return
to use to pay certain excise taxes and the
time for filing the return. The regulations
also implement the statutory addition of
two excise taxes to the first-tier taxes
subject to abatement. These regulations
affect applicable tax-exempt organiza-
tions and their related organizations,
applicable educational institutions, spon-
soring organizations that maintain certain
donor advised funds, fund managers of
such sponsoring organizations, and cer-
tain donors, donor advisors, and persons
related to a donor or donor advisor of a
donor advised fund.
DATES: Effective date: These regulations
are effective on April 9, 2019. Applicabili-
ty date: These regulations apply on and af-
ter April 9, 2019. See also §53.6071–1(j)
(3).
FOR FURTHER INFORMATION CON-
TACT: Amber L. MacKenzie, (202) 317-
4086 or Ward L. Thomas, (202) 317-6173
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regu-
lations amending 26 CFR part 53 un-
der chapter 42, subtitle D, section 4963
and chapter 61, subtitle F, sections 6011
and 6071 of the Internal Revenue Code
(Code), to specify the return to accom-
pany payment of excise taxes under
sections 4960, 4966, 4967, and 4968; to
specify the time for filing that return; and
to conform the regulations to the statu-
torily expanded definition of the first-tier
taxes subject to abatement under section
4962.
On November 7, 2018, the Depart-
ment of the Treasury (Treasury Depart-
ment) and the IRS published a notice of
proposed rulemaking (REG–107163–18)
in the Federal Register (83 FR 55653)
setting forth proposed regulations under
sections 6011 and 6071. The proposed
regulations specified Form 4720,“Return
of Certain Excise Taxes Under Chapters
41 and 42 of the Internal Revenue Code,”
April 22, 2019 1042 Bulletin No. 2019–17

Bulletin No. 2019–17 1043 April 22, 2019
as the return to accompany payment of
excise taxes under sections 4960, 4966,
4967, and 4968; required that a person
(including a governmental entity) re-
quired to file a return to report such tax
file Form 4720 by the 15th day of the
5th month after the end of the person’s
taxable year; and added sections 4966
and 4967 to the first-tier taxes subject to
abatement under section 4962.
Only one comment from the public was
received, which did not raise any concerns
or make any recommendations specific
to the proposed regulation, and no hear-
ing was requested or held. Therefore, the
proposed regulations are adopted without
change by this Treasury decision. (All
comments are available at www.regula-
tions.gov or upon request.)
Explanation of Provisions
1. Section 4962 Abatement
These final regulations add section
4966 and section 4967 excise taxes to the
definitions of ‘‘first tier tax’’ and ‘‘taxable
event’’ in §53.4963-1. Qualified first tier
taxes are subject to abatement under sec-
tion 4962.
2. Requirement To File a Form 4720
These final regulations amend §
53.6011-1(b) to provide that persons (in-
cluding governmental entities) that are li-
able for section 4960, 4966, 4967, or 4968
excise taxes are required to file a return on
Form 4720.
3. Deadline for Filing a Form 4720
Under §53.6071-1(i) of these final
regulations, a person required to file a
Form 4720 to report an excise tax under
section 4960, 4966, 4967, or 4968 must
file a Form 4720 by the 15th day of the
fifth month after the end of the person’s
taxable year during which the excise tax
liability was incurred.
4. Effective/Applicability Date
These regulations are effective on April
9, 2019. These regulations apply on and
after April 9, 2019. See also § 53.6071–
1(j)(3).
Availability of IRS Documents
For copies of recently issued revenue
procedures, revenue rulings, notices and
other guidance published in the Internal
Revenue Bulletin, please visit the IRS
Web site at http://www.irs.gov or contact
the Superintendent of Documents, U.S.
Government Publishing Office, Washing-
ton, DC 20402.
Special Analyses
This regulation is not subject to review
under section 6(b) of Executive Order
12866 pursuant to the Memorandum of
Agreement (April 11, 2018) between the
Treasury Department and the Office of
Management and Budget regarding re-
view of tax regulations.
Pursuant to the Regulatory Flexibili-
ty Act (5 U.S.C. chapter 6), it is hereby
certified that the collection of information
in these regulations will not have a sig-
nificant economic impact on a substantial
number of small entities. This certification
is based on the fact that this rule merely
provides guidance as to the timing and
filing of Form 4720 for persons liable for
the specified excise taxes and who have
a statutory filing obligation. Completing
the applicable portion of the Form 4720
imposes little incremental burden in time
or expense as compared to any other filing
method.
In addition, a person may already be
required to file the Form 4720 under the
existing final regulations in §§ 53.6011–1
and 53.6071–1 if it is liable for another
excise tax for which filing of the Form
4720 is required. Therefore, a regulatory
flexibility analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is not
required.
Pursuant to section 7805(f) of the
Code, the notice of proposed rulemak-
ing preceding these regulations was
submitted to the Chief Counsel for Ad-
vocacy of the Small Business Admin-
istration for comment on its impact on
small businesses, and no comment was
received.
Drafting Information
The principal authors of these reg-
ulations are Amber L. MacKenzie and
Ward L. Thomas of the Office of Asso-
ciate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Tax). However, other personnel from the
Treasury Department and the IRS partici-
pated in their development.
* * * * *
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 53 is amend-
ed as follows:
PART 53 – FOUNDATION AND
SIMILAR EXCISE TAXES
Paragraph 1. The authority citation for
part 53 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
§ 53.4963–1 [Amended]
Par. 2. Section 53.4963–1 is amended
by:
1. In paragraph (a), removing the lan-
guage ‘‘4958, 4971’’ and adding ‘‘4958,
4966, 4967, 4971’’ in its place.
2. In paragraph (c), removing the lan-
guage ‘‘4958, 4971’’ and adding ‘‘4958,
4966, 4967, 4971’’ in its place.
Par. 3. Section 53.6011–1(b) is amend-
ed by:
1. Revising the first sentence.
2. Removing from the third sentence
the language ‘‘4958(a), or 4965(a),’’
and adding ‘‘4958(a), 4960(a), 4965(a),
4966(a), or 4967(a),’’ in its place.
The revision reads as follows:
§53.6011–1 General requirement of
return, statement or list.
* * * * *
(b) Every person (including a gov-
ernmental entity) liable for tax imposed
by sections 4941(a), 4942(a), 4943(a),
4944(a), 4945(a), 4955(a), 4958(a), 4959,
4960(a), 4965(a), 4966(a), 4967(a), or
4968(a), and every private foundation and
every trust described in section 4947(a)(2)
which has engaged in an act of self-deal-
ing (as defined in section 4941(d)) (oth-
er than an act giving rise to no tax under
section 4941(a)) shall file an annual return
on Form 4720,“Return of Certain Excise
Taxes Under Chapters 41 and 42 of the In-
ternal Revenue Code,” and shall include

April 22, 2019 1044 Bulletin No. 2019–17
therein the information required by such
form and the instructions issued with re-
spect thereto. * * *
* * * * *
§53.6071–1 [Amended]
Par. 4. Section 53.6071–1 is amended
by:
1. Redesignating paragraph (i) as para-
graph (j).
2. Adding new paragraphs (i) and (j)
(3).
The additions read as follows:
§53.6071–1 Time for filing returns.
* * * * *
(i) Taxes under section 4960, 4966,
4967, or 4968. A person (including a gov-
ernmental entity) required by §53.6011–
1(b) to file a return for a tax imposed by
section 4960(a), 4966(a), 4967(a), or
4968(a) in a taxable year must file the Form
4720 on or before the 15th day of the fifth
month after the end of the person’s taxable
year (or, if the person has not established a
taxable year for Federal income tax purpos-
es, the person’s annual accounting period).
(j) * * *
(3) Paragraph (i) of this section applies
on and after April 9, 2019.
Kirsten Wielobob
Deputy Commissioner for Services
and Enforcement.
Approved: March 25, 2019
David J. Kautter
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on April
5, 2019, 11:15 a.m., and published in the issue of the
Federal Register for April 9, 2019, 84 F.R. 14008)

Bulletin No. 2019–17 1045 April 22, 2019
Part III.
26 CFR 601.601: Rules and regulations
(Also Part I, §§ 42 and 142)
Rev. Proc. 2019-17
SECTION 1. PURPOSE
This revenue procedure provides guid-
ance regarding the general public use re-
quirements for qualified residential rental
projects financed with tax-exempt bonds
under § 142(d) of the Internal Revenue
Code (Code). Specifically, this revenue
procedure coordinates these requirements
with the provisions in § 42(g)(9). Under
§ 42(g)(9), a project does not violate the
general public use requirement under § 42
as a result of specified occupancy restric-
tions or preferences (for example, certain
housing preferences for military veterans).
SECTION 2. BACKGROUND
.01 State and local governments may
issue tax-exempt bonds under § 103 to
finance exempt facilities (exempt facility
bonds). A qualified residential rental proj-
ect, as defined in § 142(d), is one type of
exempt facility that may be financed with
exempt facility bonds.
.02 To satisfy the requirements of
§ 142(d), a specified portion of the resi-
dential units in a residential rental project
must serve individuals with qualifying
incomes. For example, under § 142(d)(1)
(A), a residential rental project satisfies
these requirements if 20 percent or more
of the residential units in the project are
occupied by individuals whose income is
50 percent or less of area median gross in-
come.
.03 Under § 1.103-8(a)(2) of the In-
come Tax Regulations, to qualify as an
exempt facility, a facility must serve or
be available on a regular basis for gen-
eral public use, or be part of a facility so
used, as contrasted with similar types of
facilities that are constructed for the ex-
clusive use of a limited number of private
business users. For example, an apartment
building for which employees of an adja-
cent factory are given preference over oth-
er potential tenants is not available for use
by the general public. See § 1.103-8(b)(9),
Example 2.
.04 Section 42 provides a low-income
housing credit in an amount equal to a
portion of the qualified basis (as defined in
§ 42(c)(1)) of each qualified low-income
building (as defined in § 42(c)(2)) that is
part of a qualified low-income housing
project (as defined in § 42(g)).
.05 Section 1.42-9(a) provides that a
residential rental unit in a building that
is not for use by the general public is not
eligible for a low-income housing cred-
it under § 42. Section 1.42-9(a) further
provides that a residential rental unit is
for use by the general public if the unit is
rented in a manner consistent with hous-
ing policy governing non-discrimination,
as evidenced by rules or regulations of
the Department of Housing and Urban
Development. Section 1.42-9(b), howev-
er, provides that if a residential rental unit
is provided only for a member of a social
organization or provided by an employer
for its employees, the unit is not for use by
the general public and is not eligible for
a low-income housing credit under § 42.
.06 Section 42(g)(9) provides that a proj-
ect does not fail to meet the general public
use requirement solely because of occu-
pancy restrictions or preferences that favor
tenants (A) with special needs, (B) who are
members of a specified group under a Fed-
eral program or State program or policy that
supports housing for such a specified group,
or (C) who are involved in artistic or literary
activities. For example, there are certain Fed-
eral or State programs that support housing
for military veterans. Section 42(g)(9) was
added to the Code by § 3004(g) of the Hous-
ing and Economic Recovery Act of 2008,
Pub. L. 110-289, 122 Stat. 2654, 2884.
.07 Section 142(d) does not contain a
provision similar to § 42(g)(9). Low-in-
come housing credits under § 42 and ex-
empt facility bonds issued under § 142(d)
are often used together to finance residen-
tial rental projects. Questions have arisen
as to whether a project that is treated as
not failing the general public use require-
ment solely based on the restrictions or
preferences provided under § 42(g)(9) for
purposes of the low-income housing cred-
it under § 42 may be treated as not failing
the general public use requirement appli-
cable to tax-exempt financing of qualified
residential rental projects under § 142(d).
SECTION 3. SCOPE
This revenue procedure only applies
to exempt facility bonds that finance
qualified residential rental projects under
§ 142(d) and does not affect the rules appli-
cable to exempt facility bonds that finance
other exempt facilities. For rules applica-
ble to exempt facility bonds that finance
other exempt facilities, see, generally,
§ 1.103-8.
SECTION 4. APPLICATION
A qualified residential rental project (as
defined in § 142(d)) does not fail to meet
the general public use requirement appli-
cable to exempt facilities solely because
of occupancy restrictions or preferences
that favor tenants described in § 42(g)(9)
(for example, certain housing preferences
for military veterans).
SECTION 5. EFFECTIVE DATE
This revenue procedure applies to bonds
sold before, on, or after April 3, 2019.
SECTION 6. DRAFTING
INFORMATION
The principal author of this revenue pro-
cedure is Johanna Som de Cerff of the Of-
fice of Associate Chief Counsel (Financial
Institutions & Products). For further infor-
mation regarding this revenue procedure
contact Johanna Som de Cerff on (202)
317-6980 (not a toll free number).

Section 42.—Low-income
housing credit
This revenue procedure provides guidance re-
garding the general public use requirements for
qualified residential rental projects financed with
tax-exempt bonds under § 142(d) of the Internal
Revenue Code. Specifically, this revenue procedure
coordinates these requirements with the provisions
in § 42(g)(9). Under § 42(g)(9), a project does not
violate the general public use requirement under
§ 42 as a result of specified occupancy restrictions
or preferences (for example, certain housing prefer-
ences for military veterans). See Rev. Proc. 2019-
17, p. [1045].

April 22, 2019 1046 Bulletin No. 2019–17
Part IV.
Notice of Proposed
Rulemaking; Notification of
Public Hearing
Information Reporting for
Certain Life Insurance
Contract Transactions
and Modifications to the
Transfer for Valuable
Consideration Rules
REG-103083-18
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing; notification of public hearing.
SUMMARY: This document contains
proposed regulations providing guidance
on new information reporting obligations
under section 6050Y related to reportable
policy sales of life insurance contracts and
payments of reportable death benefits.
The proposed regulations also provide
guidance on the amount of death benefits
excluded from gross income under section
101 following a reportable policy sale.
The proposed regulations affect parties
involved in certain life insurance contract
transactions, including reportable policy
sales, transfers of life insurance contracts
to foreign persons, and payments of re-
portable death benefits. This document
invites comments and provides a notice of
a public hearing on these proposed regu-
lations.
DATES: Written or electronic comments
must be received by May 9, 2019. Re-
quests to speak and outlines of topics to
be discussed at the public hearing sched-
uled for June 5, 2019, at 10 a.m. must be
received by May 9, 2019.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG-103083-18),
Room 5203, Internal Revenue Service,
P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
be hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m. to
CC:PA:LPD:PR (REG-103083-18), Cou-
rier’s Desk, Internal Revenue Service,
1111 Constitution Avenue NW, Washing-
ton, DC 20224, or sent electronically via
the Federal eRulemaking Portal at www.
regulations.gov (IRS REG-103083-18).
FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Kathryn M. Sneade, (202) 317-6995;
concerning submissions of comments and
requests to speak at the public hearing,
Regina Johnson, (202) 317-6901 (not toll-
free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in this notice of proposed rulemak-
ing has been submitted to the Office of
Management and Budget for review under
OMB Control Numbers 1545-0119, 1545-
1621, and 1545-2281 in accordance with
the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). In general, the collec-
tion of information in the proposed reg-
ulations is required under section 6050Y
of the Internal Revenue Code (Code): (1)
The requirement under §1.6050Y-2 of the
proposed regulations for an acquirer to re-
port certain information about payments
made in reportable policy sales is required
under section 6050Y(a); (2) the require-
ment under §1.6050Y-3 of the proposed
regulations for an issuer to report certain
information about transferors of life insur-
ance contracts is required under section
6050Y(b); and (3) the requirement under
§1.6050Y-4 of the proposed regulations
for a payor to report certain information
about payments of reportable death ben-
efits is required under section 6050Y(c).
Section 1.6050Y-3(a)(3) of the proposed
regulations would require the issuer to re-
port to the seller and the IRS the amount
the seller would have received if the seller
had surrendered the life insurance contract
on the date of the reportable policy sale.
This information is necessary to allow the
seller and the IRS to determine the charac-
ter of all or a portion of the seller’s taxable
income from the sale of the life insurance
contract (capital or ordinary). Sections
1.6050Y-3(f)(1) and 1.6050Y-4(e)(1)
of the proposed regulations contain re-
porting exceptions for certain foreign
beneficial owners. To determine quali-
fication for these reporting exceptions,
§§1.6050Y-3(f)(1) and 1.6050Y-4(e)(1)
would require that certain foreign ben-
eficial owners provide a Form W-8ECI,
“Certificate of Foreign Person’s Claim
that Income is Effectively Connected
with the Conduct of a Trade or Business
in the United States,” to certain persons.
This information is necessary to document
whether the reporting exception in either
§1.6050Y-3(f)(1) or §1.6050Y-4(e)(1) ap-
plies in a particular situation.
The likely respondents to the collection
of information are (1) Entities acquiring
life insurance contracts in reportable poli-
cy sales; (2) life insurance companies; (3)
life insurance companies and other entities
making payments of reportable death ben-
efits; and (4) entities receiving payments
of reportable death benefits.
The burden for the collection of infor-
mation contained in §1.6050Y-2 of the
proposed regulations will be reflected in
the burden on the form that the IRS cre-
ated to request the information in section
6050Y(a) and §1.6050Y-2 of the proposed
regulations (Form 1099-LS, “Reportable
Life Insurance Sale”). The burden for the
collection of information contained in
§1.6050Y-3 of the proposed regulations
will be reflected in the burden on the form
that the IRS created to request the informa-
tion in section 6050Y(b) and §1.6050Y-3
of the proposed regulations (Form 1099-
SB, “Seller’s Investment in Life Insurance
Contract”). The OMB Control Number
for both of these forms is 1545-2281. The
burden for the collection of information
contained in §1.6050Y-4 of the proposed
regulations will be reflected in the burden
on the Form 1099-R, “Distributions From
Pensions, Annuities, Retirement or Prof-
it-Sharing Plans, IRAs, Insurance Con-
tracts, etc.” (OMB Control Number 1545-
0119). The burden for the collection of
information contained in §§1.6050Y-3(f)
(1) and 1.6050Y-4(e)(1) of the proposed
regulations will be reflected in the bur-

Bulletin No. 2019–17 1047 April 22, 2019
den on the Form W-8ECI (OMB Control
Number 1545-1621), when the burden is
revised to reflect the additional collection
of information in §§1.6050Y-3(f)(1) and
1.6050Y-4(e)(1) of the proposed regula-
tions.
Comments on the collection of infor-
mation should be sent to the Office of
Management and Budget, Attn: Desk
Officer for the Department of the Trea-
sury, Office of Information and Regula-
tory Affairs, Washington, DC 20503, with
copies to the Internal Revenue Service,
Attn: IRS Reports Clearance Officer, SE:-
CAR:MP:T:T:SP, Washington, DC 20224.
Comments on the collection of informa-
tion should be received by May 24, 2019.
Comments are specifically requested
concerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the IRS, in-
cluding whether the information will have
practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information;
How the quality, utility, and clarity of
the information to be collected may be en-
hanced;
How the burden of complying with
the proposed collection of information
may be minimized, including through the
application of automated collection tech-
niques or other forms of information tech-
nology; and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of services to provide informa-
tion.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless it dis-
plays a valid control number assigned by
the Office of Management and Budget.
Background
This document contains proposed
amendments to 26 CFR part 1 under sec-
tions 101 and 6050Y of the Code (pro-
posed regulations). The proposed regula-
tions implement recent legislative changes
to sections 101 and 6050Y by sections
13520 and 13522 of “[a]n Act to provide
for reconciliation pursuant to titles II and
V of the concurrent resolution on the bud-
get for fiscal year 2018,” Pub. L. 115-97,
131 Stat. 2054, 2149 (Act). The proposed
regulations under section 101 amend final
regulations under section 101 published
in the Federal Register on November
26, 1960 (25 FR 11402), as subsequent-
ly amended on December 24, 1964 (29
FR 18356), September 27, 1982 (47 FR
42337), and July 26, 2007 (72 FR 41159)
(existing regulations).
Section 13520 of the Act added section
6050Y to chapter 61 (Information and Re-
turns) of subtitle A of the Code (chapter
61). Section 6050Y imposes information
reporting obligations related to certain life
insurance contract transactions, including
reportable policy sales and payments of
reportable death benefits. Section 6050Y
provides that each of the returns required
by section 6050Y is to be made “at such
time and in such manner as the Secretary
shall prescribe.” The proposed regulations
under section 6050Y implement section
6050Y. The proposed regulations specify
the manner in which and time at which the
information reporting obligations must be
satisfied. The proposed regulations also
provide definitions and rules that govern
the application of the information report-
ing obligations.
Section 13522 of the Act amended sec-
tion 101. New section 101(a)(3) defines
the term “reportable policy sale” and pro-
vides rules for determining the amount
of death benefits excluded from gross in-
come following a reportable policy sale.
The proposed regulations under section
101 provide definitions applicable under
sections 101 and 6050Y and guidance for
determining the amount of death benefits
excluded from gross income following a
reportable policy sale.
Notice 2018-41, 2018-20 I.R.B. 584,
described sections 13520 and 13522 of the
Act and the regulations the Department of
the Treasury (Treasury Department) and
the IRS expected to propose under sec-
tions 101 and 6050Y. The Treasury De-
partment and the IRS received comments
in response to the notice and considered
these comments in developing these pro-
posed regulations.
Explanation of Provisions
Section 6050Y imposes information
reporting obligations related to reportable
policy sales of life insurance contracts and
payments of reportable death benefits.
Section 1.6050Y-1 of the proposed reg-
ulations contains definitional provisions.
Sections 1.6050Y-2, 1.6050Y-3, and
1.6050Y-4 of the proposed regulations
provide guidance on the reporting obliga-
tions imposed by section 6050Y(a), (b),
and (c), respectively.
1. Section 1.6050Y-1: Definitions
The definitions set forth in §1.6050Y-1
of the proposed regulations apply for pur-
poses of §§1.6050Y-1 through -4 of the
proposed regulations.
Under the proposed regulations, “life
insurance contract,” also referred to as a
life insurance policy, is defined by refer-
ence to section 7702(a). See §1.6050Y-1(a)
(9) of the proposed regulations. “Interest
in a life insurance contract,” “transfer of
an interest in a life insurance contract,”
“direct acquisition of an interest in a life
insurance contract,” “indirect acquisition
of an interest in a life insurance contract,”
and “reportable policy sale” are defined
by reference to the proposed regulations
under section 101. See §1.6050Y-1(a)(3),
(5), (6), (14), and (19) of the proposed
regulations. “Foreign person” means a
person that is not a “United States per-
son,” as defined in section 7701(a)(30).
See §1.6050Y-1(a)(4) of the proposed reg-
ulations.
Section 6050Y(a) requires any person
that acquires a life insurance contract or
any interest in a life insurance contract in
a reportable policy sale during any taxable
year to report certain information regard-
ing the transaction, including information
about each recipient of payment in the re-
portable policy sale. Under the proposed
regulations, “acquirer” means any person
that, directly or indirectly, acquires an in-
terest in a life insurance contract in a re-
portable policy sale. See §1.6050Y-1(a)(1)
of the proposed regulations.
Section 6050Y(d)(1) defines “pay-
ment,” with respect to any reportable pol-
icy sale, to mean the amount of cash and
the fair market value of any other consid-
eration transferred in the sale. Under the
proposed regulations, “reportable policy
sale payment” means the total amount of
cash and the fair market value of any oth-
er consideration transferred, or to be trans-

April 22, 2019 1048 Bulletin No. 2019–17
ferred, in a reportable policy sale, includ-
ing any amount of a reportable policy sale
payment recipient’s debt assumed by the
acquirer in a reportable policy sale. See
§1.6050Y-1(a)(15) of the proposed regu-
lations. An interest in a life insurance con-
tract may be acquired directly, from the
direct holder of the interest, or indirectly,
through the acquisition of an ownership
interest in an entity that holds an interest
in a life insurance contract. See §§1.101-
1(e)(3)(i) and (ii) and 1.6050Y-1(a)(3) and
(5) of the proposed regulations. In the case
of an indirect acquisition of an interest in
a life insurance contract that is a report-
able policy sale, the reportable policy sale
payment is the amount of cash and the fair
market value of any other consideration
transferred for the ownership interest in
the entity that is appropriately allocable to
the interest in the life insurance contract
held by the entity. See §1.6050Y-1(a)(15)
of the proposed regulations. The proposed
regulations require the acquirer to report
the aggregate amount of reportable policy
sale payments made, or to be made, with
respect to a reportable policy sale. See
§1.6050Y-2(a)(5) of the proposed regu-
lations. Accordingly, when an acquirer
makes payments in installments in more
than one year, the acquirer reports the total
amount of all payments in the year of the
policy sale.
“Reportable policy sale payment re-
cipient” means any person that receives
a reportable policy sale payment in a re-
portable policy sale. See §1.6050Y-1(a)
(16) of the proposed regulations. The
seller in a reportable policy sale is a re-
portable policy sale payment recipient if
the seller receives a reportable policy sale
payment. A broker or other intermediary
that retains a portion of the cash or oth-
er consideration transferred in a report-
able policy sale is also a reportable policy
sale payment recipient. Id. The aggregate
amount of all reportable policy sale pay-
ments made with respect to a reportable
policy sale must be reported under section
6050Y(a). The objective of the proposed
regulations is for the acquirer to report the
net payment, if any, made to each person
involved in a reportable policy sale. Ac-
cordingly, if the acquirer transfers cash or
other consideration to a broker in a report-
able policy sale, the broker is a reportable
policy sale payment recipient, and the re-
portable policy sale payment made to the
broker is the amount of cash and the fair
market value of any other consideration
retained by the broker. The reportable pol-
icy sale payment made to the seller would
be the amount of cash and fair market val-
ue of any other consideration transferred
to the seller, including any amount of the
seller’s debt assumed by the acquirer in a
reportable policy sale, and it would not in-
clude the amount of the reportable policy
sale payment made to the broker.
Comments received on Notice 2018-41
suggested that the amount of the payment
to a seller in a reportable policy sale that
should be reported under section 6050Y(a)
should be the amount actually paid to the
seller. These comments were taken into
consideration in developing the definition
of “reportable policy sale payment recip-
ient” in the proposed regulations, as well
as the reporting requirements in the pro-
posed regulations, which require the ac-
quirer in a reportable policy sale to report,
with respect to each reportable policy sale
payment recipient, the aggregate amount
of reportable policy sale payments made
to that person. See §1.6050Y-2(a)(5) of
the proposed regulations.
Comments received on Notice 2018-
41 suggested that no reporting should be
required for payments of ancillary costs
and expenses in a reportable policy sale,
including broker fees, securities interme-
diary fees, and other fees and expenses.
Comments noted that the person pay-
ing these expenses is normally paying
them in connection with the conduct of
a trade or business, and is therefore re-
quired to report these amounts to payees
in accordance with applicable rules. The
proposed regulations require the acquir-
er in a reportable policy sale to report
all reportable policy sale payments made
with respect to the reportable policy sale,
meaning all amounts of cash and the fair
market value of any other consideration
transferred in the reportable policy sale,
including any amount of a reportable pol-
icy sale payment recipient’s debt assumed
by the acquirer in a reportable policy sale.
The Treasury Department and the IRS are
considering whether reportable policy sale
payments should be defined to exclude
payments of any ancillary costs and ex-
penses and request comments regarding
the types of payments made by acquirers
in reportable policy sales, the recipients of
those payments, and existing reporting re-
quirements applicable to those payments.
Section 6050Y(b) requires issuers of
life insurance contracts receiving a writ-
ten statement furnished by an acquirer
under section 6050Y(a) and §1.6050Y-2
of the proposed regulations (a “reportable
policy sale statement” or “RPSS,” under
§1.6050Y-1(a)(17) of the proposed reg-
ulations) or notice of a transfer to a for-
eign person to report certain information
regarding sellers. Under the proposed
regulations, “seller” means any person
that holds an interest in a life insurance
contract and transfers that interest, or any
part of that interest, to an acquirer in a
reportable policy sale or any person that
owns a life insurance contract and trans-
fers title to, possession of, or legal own-
ership of that life insurance contract to a
foreign person. See §1.6050Y-1(a)(18)
of the proposed regulations. “Notice of a
transfer to a foreign person” means any
notice of a transfer of a life insurance con-
tract (i.e., a transfer of title to, possession
of, or legal ownership of the life insurance
contract) received by a 6050Y(b) issuer
(as that term is defined in §1.6050Y-1(a)
(8)(iii)(B) of the proposed regulations).
See §1.6050Y-1(a)(10) of the proposed
regulations. Notice of a transfer to a for-
eign person includes information provid-
ed for nontax purposes such as a change
of address notice for purposes of sending
statements or for other purposes, and in-
formation relating to loans, premiums, or
death benefits with respect to the contract,
unless the 6050Y(b) issuer knows that no
transfer of the life insurance contract has
occurred or knows the transferee is a Unit-
ed States person. Id. For this purpose, a
6050Y(b) issuer may rely on a Form W-9,
Request for Taxpayer Identification Num-
ber and Certification, or a valid substi-
tute form, that meets the requirements of
§1.1441-1(d)(2) (substituting “6050Y(b)
issuer” for “withholding agent”), that in-
dicates the transferee is a United States
person.
The definition of “issuer” under the
proposed regulations depends on the con-
text in which the term is used. In general,
the term “issuer” means, on any date, with
respect to any interest in a life insurance
contract, any person that bears any part
of the risk with respect to the life insur-

Bulletin No. 2019–17 1049 April 22, 2019
ance contract on that date and any per-
son responsible on that date for adminis-
tering the contract, including collecting
premiums and paying death benefits. See
§1.6050Y-1(a)(8)(i) of the proposed reg-
ulations. For instance, if a reinsurer rein-
sures on an indemnity basis all or a portion
of the risks that the original issuer (and
continuing contract administrator) might
otherwise have incurred with respect to a
life insurance contract, both the reinsurer
and the original issuer of the contract are
issuers of the life insurance contract. Id.
Additionally, any designee of an issuer
for purposes of section 6050Y reporting
purposes is generally also considered an
issuer. See §1.6050Y-1(a)(8)(i) of the pro-
posed regulations. Under §1.6050Y-1(a)
(8)(iv) of the proposed regulations, a per-
son is the designee of an issuer for pur-
poses of section 6050Y reporting under
§1.6050Y-1(a)(8) only if so designated
in writing, including electronically. The
designation must be signed and acknowl-
edged, in writing or electronically, by the
person named as designee, or that person’s
representative, and by the issuer making
the designation, or a representative of that
issuer.
For purposes of information reporting
by the acquirer under section 6050Y(a)
and §1.6050Y-2 of the proposed regula-
tions, the “6050Y(a) issuer” is the issuer
that is responsible for administering the
life insurance contract, including collect-
ing premiums and paying death benefits
under the contract, on the date of the re-
portable policy sale. See §1.6050Y-1(a)(8)
(ii) of the proposed regulations.
For purposes of information reporting
by the issuer under section 6050Y(b) and
§1.6050Y-3 of the proposed regulations,
the definition of “6050Y(b) issuer” de-
pends on whether the reporting obligation
results from a reportable policy sale and
the receipt of a RPSS, or by a transfer to
a foreign person and the receipt of no-
tice of a transfer to a foreign person. See
§1.6050Y-1(a)(8)(iii)(A) of the proposed
regulations (applicable to reportable pol-
icy sales) and §1.6050Y-1(a)(8)(iii)(B) of
the proposed regulations (applicable to
transfers to foreign persons).
With respect to a life insurance contract,
or an interest therein, that is transferred
in a reportable policy sale, the 6050Y(b)
issuer is any person that (1) Receives a
RPSS with respect to the life insurance
contract or interest therein (or, in the case
of a designee, receives notice that the issu-
er for whom it serves as designee received
a RPSS), and (2) is or was, on or before
the date of receipt of the RPSS, an issuer
(as defined in §1.6050Y-1(a)(8)(i) of the
proposed regulations) with respect to the
life insurance contract. See §1.6050Y-1(a)
(8)(iii)(A) of the proposed regulations.
More than one person may meet this defi-
nition, but a 6050Y(b) issuer’s reporting
obligation is deemed satisfied if the infor-
mation required by section 6050Y(b) and
§1.6050Y-3 is timely reported by any oth-
er 6050Y(b) issuer. See §1.6050Y-3(b) of
the proposed regulations.
With respect to a life insurance con-
tract transferred to a foreign person, the
6050Y(b) issuer generally is any person
that (1) Receives notice of the transfer of
the life insurance contract to a foreign per-
son, and (2) is or was, on the date of trans-
fer or on the date of receipt of the notice,
an issuer (as defined in §1.6050Y-1(a)(8)
(i) of the proposed regulations), with re-
spect to the life insurance contract. See
§1.6050Y-1(a)(8)(iii)(B) of the proposed
regulations. However, a person is not a
6050Y(b) issuer under §1.6050Y-1(a)(8)
(iii)(B) of the proposed regulations if (1)
That person (or, in the case of a designee,
the issuer for whom it serves as designee)
is not responsible for administering the
life insurance contract, including collect-
ing premiums and paying death benefits
under the contract, on the date the notice
of a transfer to a foreign person of a life
insurance contract is received, and (2)
that person, or its designee, provides the
6050Y(b) issuer that is responsible for
administering the life insurance contract,
including collecting premiums and pay-
ing death benefits under the contract, on
that date with such notice and any avail-
able information necessary to accomplish
reporting under section 6050Y(b) and
§1.6050Y-3 of the proposed regulations.
See §1.6050Y-1(a)(8)(iii)(B) of the pro-
posed regulations.
Section 6050Y(c) imposes reporting
requirements on any person that makes
a payment of reportable death benefits
during any taxable year. Section 6050Y(d)
(4) defines the term “reportable death ben-
efits” to mean amounts paid by reason of
the death of the insured under a life in-
surance contract that has been transferred
in a reportable policy sale. The proposed
regulations clarify that the amounts must
be attributable to an interest in the life in-
surance contract that was transferred in a
reportable policy sale. See §1.6050Y-1(a)
(12) of the proposed regulations. For in-
stance, if the original policyholder of a life
insurance contract transfers a 50 percent
interest in the life insurance contract in a
reportable policy sale, amounts paid by
reason of the death of the insured that are
attributable to the 50 percent interest re-
tained by the original policyholder are not
reportable death benefits.
The proposed regulations define “pay-
or” to mean any person making a payment
of reportable death benefits and “report-
able death benefits payment recipient” to
mean any person that receives reportable
death benefits as a beneficiary under the
life insurance contract or as the holder of
an interest in the life insurance contract.
See §1.6050Y-1(a)(11) and (13) of the
proposed regulations. Comments received
on Notice 2018-41 suggested that “payor”
be defined the same as “issuer” for pur-
poses of section 6050Y. The proposed
regulations do not adopt this suggestion,
but comments are requested as to wheth-
er payor should be so narrowly defined,
or should also include any holder of an
interest in a life insurance contract that
receives reportable death benefits attrib-
utable to that interest and is contractually
obligated to pay part or all of the proceeds
to the beneficial owner of the interest.
Comments are also requested as to wheth-
er, for purposes of reporting under section
6050Y(c), reportable death benefits pay-
ment recipients should include, in addi-
tion to any person that receives reportable
death benefits as a beneficiary under the
life insurance contract, any person that
receives reportable death benefits as the
holder of an interest in the life insurance
contract.
Section 6050Y(b) and §1.6050Y-3 of
the proposed regulations require issuers to
report the seller’s investment in the con-
tract to the seller, and section 6050Y(c)
and §1.6050Y-4 of the proposed regula-
tions require payors to report the payor’s
estimate of the buyer’s investment in the
contract to the reportable death benefits
payment recipient. The “buyer,” with re-
spect to any interest in a life insurance

April 22, 2019 1050 Bulletin No. 2019–17
contract that has been transferred in a re-
portable policy sale, is the person that was
the most recent acquirer of that interest in
a reportable policy sale as of the date re-
portable death benefits are paid under the
contract. See §1.6050Y-1(a)(2) of the pro-
posed regulations.
Under the proposed regulations, the
meaning of “investment in the contract”
depends on whose investment in the con-
tract is being determined. With respect
to the original policyholder of a life in-
surance contract, §1.6050Y-1(a)(7)(i) of
the proposed regulations provides that
“investment in the contract” has the same
meaning as under section 72(e)(6). With
respect to the original policyholder, the
issuer will have all of the information re-
quired to determine that amount.
With respect to anyone other than the
original policyholder, the issuer or payor
may lack information required to deter-
mine the seller’s or buyer’s investment in
the contract as defined in section 72(e)(6),
such as the aggregate amount of consid-
eration paid for the contract and the ex-
tent to which amounts received under the
contract were excludable from gross in-
come. In this context, §1.6050Y-1(a)(7)(i)
of the proposed regulations provides that
“investment in the contract” has the same
meaning as “estimate of investment in the
contract.” Section 1.6050Y-1(a)(7)(ii) of
the proposed regulations defines “estimate
of investment in the contract” with respect
to any person other than the original poli-
cyholder to mean, on any date, the aggre-
gate amount of premiums paid for the con-
tract by that person before that date, less
the aggregate amount received under the
contract by that person before that date to
the extent such information is known to or
can reasonably be estimated by the issuer
or payor.
2. Section 1.6050Y-2: Reporting of Pay-
ments by Acquirer in a Reportable Policy
Sale
Section 6050Y(a) requires reporting
of payments made by an acquirer in a re-
portable policy sale. Section 1.6050Y-2(a)
of the proposed regulations sets forth the
requirement of information reporting ap-
plicable to acquirers in reportable policy
sales under section 6050Y(a)(1) and de-
scribes the information that must be re-
ported.
The proposed regulations allow for
unified reporting by the acquirers in a
series of prearranged transfers of any
interest in a life insurance contract. See
§1.6050Y-2(b) and (d)(3) of the proposed
regulations. A series of prearranged trans-
fers of an interest in a life insurance con-
tract may include transfers in which one
or more persons serve as intermediaries.
Such intermediaries may acquire title or
possession of an interest in a life insur-
ance contract for state law purposes as
nominee on behalf of another person or
persons. Comments received on Notice
2018-41 suggested that a rule allowing
unified reporting be adopted with respect
to acquirers in a series of prearranged
transfers, and these comments were taken
into consideration in developing the rules
in the proposed regulations.
Section 1.6050Y-2(c) of the proposed
regulations sets forth the time and place
for filing returns required under section
6050Y(a)(1).
Section 1.6050Y-2(d) of the proposed
regulations sets forth the requirement un-
der section 6050Y(a)(2) for the acquirer in
a reportable policy sale to furnish a writ-
ten statement to certain persons with re-
spect to whom information is required on
the return required by section 6050Y(a)
(1). These persons are the recipients of
payments in reportable policy sales (re-
portable policy sale payment recipients)
and the 6050Y(a) issuers.
A written statement provided to a re-
portable policy sale payment recipient is
not required to include information with
respect to any other reportable policy
sale payment recipient in the reportable
policy sale. See §1.6050Y-2(d)(1)(i) of
the proposed regulations. For instance,
the statement is not required to provide
information about reportable policy sale
payments to any other reportable policy
sale payment recipient. Id. The contact
information of the person furnishing the
written statement must provide direct ac-
cess to a person that can answer questions
about the statement. Id. Reportable policy
sale payment recipients may use the infor-
mation in the written statements furnished
by acquirers to determine their taxable
income. To facilitate proper tax reporting,
the proposed regulations provide that an
acquirer must furnish any written state-
ment required to be provided to a report-
able policy sale payment recipient no later
than February 15 of the year following the
calendar year in which the reportable pol-
icy sale occurs. See §1.6050Y-2(d)(1)(ii)
of the proposed regulations. The proposed
regulations adopt this deadline because a
person may be both a reportable policy
sale payment recipient and a seller with
respect to a reportable policy sale, and this
deadline for an acquirer to furnish a writ-
ten statement to a reportable policy sale
payment recipient coordinates with the
deadline in §1.6050Y-3(d)(2) of the pro-
posed regulations for a 6050Y(b) issuer
that receives a RPSS to furnish a written
statement to a seller.
Generally, a 6050Y(a) issuer that re-
ceives a RPSS from an acquirer becomes
a 6050Y(b) issuer subject to reporting ob-
ligations under section 6050Y(b), includ-
ing the obligation under section 6050Y(b)
(2) to furnish a written statement to the
seller in a reportable policy sale. Because
6050Y(b) issuers’ reporting obligation
is with respect to sellers, the proposed
regulations provide that acquirers must
furnish the 6050Y(a) issuer with a RPSS
with respect to each reportable policy sale
payment recipient that is also a seller. See
§1.6050Y-2(d)(2)(i)(A) of the proposed
regulations. However, an acquirer acquir-
ing an interest in a life insurance contract
in an indirect acquisition is not required
to furnish a RPSS to the 6050Y(a) issu-
er. See §1.6050Y-2(d)(2)(i)(B) of the pro-
posed regulations. As provided in section
6050Y(a)(2)(B), the proposed regulations
provide that acquirers are not required to
set forth the amount of any reportable pol-
icy sale payment in a RPSS furnished to
a 6050Y(a) issuer. See §1.6050Y-2(d)(2)
(i)(A) of the proposed regulations. Sellers
may need the information in the written
statements furnished by 6050Y(b) issuers
that have received a RPSS to determine
their taxable income. To facilitate proper
tax reporting, the proposed regulations
therefore provide that an acquirer must
furnish a RPSS to the 6050Y(a) issuer by
the later of (1) 20 days after the reportable
policy sale, or (2) 5 days after the end of
the applicable state law rescission period.
See §1.6050Y-2(d)(2)(ii) of the proposed
regulations. However, if the later date is
after January 15 of the year following

Bulletin No. 2019–17 1051 April 22, 2019
the calendar year in which the reportable
policy sale occurred, the RPSS must be
furnished by January 15 of the year fol-
lowing the calendar year in which the re-
portable policy sale occurred. Id. Section
1.6050Y-3(d)(2) of the proposed regula-
tions generally requires that the 6050Y(b)
issuer furnish any written statement re-
quired by section 6050Y(b)(2) to the sell-
er no later than February 15 of the year
following the calendar year in which the
reportable policy sale occurs.
Section 1.6050Y-2(e) of the proposed
regulations requires the acquirer to cor-
rect returns filed under section 6050Y(a)
(1) and written statements furnished under
section 6050Y(a)(2) within 15 days of the
acquirer’s receipt of notice of the rescis-
sion of the related reportable policy sale.
Section 1.6050Y-2(f) of the proposed
regulations sets forth exceptions to report-
ing under section 6050Y(a) that may ap-
ply to an acquirer that is a foreign person.
These exceptions are described in section
5 of this Explanation of Provisions.
Section 1.6050Y-2(g) of the proposed
regulations describes the penalty provi-
sions applicable when a person is required
under section 6050Y(a) to file an infor-
mation return, or furnish a written state-
ment, but fails to do so on or before the
prescribed date, fails to include all of the
information required to be shown, or in-
cludes incorrect information.
3. Section 1.6050Y-3: Reporting of
Transferor’s Investment in the Contract by
6050Y(b) Issuer (Reportable Policy Sale
or Transfer to a Foreign Person)
Section 6050Y(b) requires the issuer
to report certain information to the seller,
including the seller’s investment in the
contract. Section 1.6050Y-3(a) of the pro-
posed regulations sets forth the informa-
tion reporting requirement applicable to
6050Y(b) issuers under section 6050Y(b)
(1). In addition to the specific informa-
tion required to be reported under section
6050Y(b)(1), Notice 2018-41 indicated
that the proposed regulations would re-
quire the issuer to report the amount that
would have been received by the policy-
holder upon surrender of the contract. A
comment received on Notice 2018-41
suggested that an issuer should not be re-
quired to report this amount because the
information may be provided directly by
the issuer to the seller upon request.
A purpose of section 6050Y is to pro-
vide the seller in a reportable policy sale
and the IRS with the information needed
to determine the seller’s taxable income
from the sale. In the case of a sale of a
cash value life insurance contract, the
gain is ordinary income to the extent of
the amount that would be recognized as
ordinary income if the contract were sur-
rendered, and any excess is capital gain.
See Rev. Rul. 2009-13, 2009-21 I.R.B.
1029. To ensure that the seller and the
IRS have the relevant information need-
ed to calculate the seller’s gain from the
sale, including the amount of any capital
or ordinary gain, the proposed regulations
do not adopt the suggestion and would re-
quire the 6050Y(b) issuer to report to the
seller and the IRS the amount that would
have been received by the policyholder
upon surrender of the contract. The Trea-
sury Department and the IRS have deter-
mined that requiring the reporting of this
information is authorized under section
6050Y(b)(1), as well as under sections
6011(a) and 7805.
Section 1.6050Y-3(b) of the proposed
regulations provides that a 6050Y(b) is-
suer’s reporting obligation under section
6050Y(b) and §1.6050Y-3(a) is deemed
satisfied if the information required by
section 6050Y(b) and §1.6050Y-3 is time-
ly reported by any other 6050Y(b) issuer
or a third party information reporting con-
tractor.
Section 1.6050Y-3(c) of the proposed
regulations sets forth the time and place
for filing returns required under section
6050Y(b)(1).
Section 1.6050Y-3(d)(1) of the pro-
posed regulations sets forth the require-
ment under section 6050Y(b)(2) to furnish
statements to certain persons with respect
to whom information is required on the
return required by section 6050Y(b)(1).
These persons are the sellers that (1)
Transfer interests in life insurance con-
tracts in reportable policy sales and are
reportable policy sale payment recipients,
or (2) transfer life insurance contracts to
foreign persons. The sellers may use the
information in the written statements fur-
nished under section 6050Y(b)(2) to de-
termine their taxable income.
To facilitate proper tax reporting,
§1.6050Y-2(d)(2)(ii) of the proposed reg-
ulations requires acquirers to furnish a
RPSS to the 6050Y(a) issuer by January
15 of the year following the calendar year
in which the reportable policy sale oc-
curred, if not earlier, and §1.6050Y-3(d)(2)
of the proposed regulations provides that
a 6050Y(b) issuer generally must furnish
any written statement required to be pro-
vided to a seller no later than February 15
of the year following the calendar year in
which the reportable policy sale or trans-
fer to a foreign person occurs. Comments
received on Notice 2018-41 suggested
that issuers be required to furnish written
statements required by section 6050Y(b)
(2) to the seller no later than February 15
of the year following the calendar year in
which the reportable policy sale occurs,
noting that this is currently the due date for
section 6045 broker returns and consoli-
dated statements, and brokers also rely on
third party information (e.g., dividend re-
classifications). The Treasury Department
and the IRS propose to adopt this sug-
gestion. See §1.6050Y-3(d)(2) of the pro-
posed regulations. Section 1.6050Y-3(d)
(3) of the proposed regulations provides
that a 6050Y(b) issuer’s reporting obli-
gation is deemed satisfied if the informa-
tion required by §1.6050Y-3(d)(1) of the
proposed regulations with respect to that
6050Y(b) issuer is timely reported on
behalf of that 6050Y(b) issuer consistent
with forms, instructions, and other IRS
guidance by one or more other 6050Y(b)
issuers or by a third party information re-
porting contractor.
Section 1.6050Y-3(e) of the proposed
regulations requires the 6050Y(b) issu-
er to correct returns filed under section
6050Y(b)(1) and written statements fur-
nished under section 6050Y(b)(2) within
15 days of the 6050Y(b) issuer’s receipt
of notice of the rescission of the related
reportable policy sale or transfer to a for-
eign person.
Section 1.6050Y-3(f) of the proposed
regulations sets forth exceptions to report-
ing under section 6050Y(b) that may ap-
ply to 6050Y(b) issuers. These exceptions
are described in section 5 of this Explana-
tion of Provisions.
Section 1.6050Y-3(g) of the proposed
regulations describes the penalty provi-
sions applicable when a person is required
under section 6050Y(b) to file an infor-
mation return, or furnish a written state-
ment, but fails to do so on or before the

April 22, 2019 1052 Bulletin No. 2019–17
prescribed date, fails to include all of the
information required to be shown, or in-
cludes incorrect information.
4. Section 1.6050Y-4: Reporting of Re-
portable Death Benefits by Payor
Section 6050Y(c) requires payors to
report payments of reportable death bene-
fits. Section 1.6050Y-4(a) of the proposed
regulations sets forth the requirement of
information reporting applicable to payors
under section 6050Y(c)(1).
Section 1.6050Y-4(b) of the proposed
regulations sets forth the time and place
for filing returns required under section
6050Y(c)(1).
Section 1.6050Y-4(c)(1) of the pro-
posed regulations sets forth the require-
ment under section 6050Y(c)(2) to fur-
nish statements to persons with respect
to whom information is required on the
return required by section 6050Y(c)(1).
These persons are the recipients of report-
able death benefits (reportable death ben-
efits payment recipients). The reportable
death benefits payment recipients may use
the information in the written statements
furnished under section 6050Y(c)(2) to
determine their taxable income. To facil-
itate proper tax reporting, §1.6050Y-4(c)
(2) of the proposed regulations provides
that a payor must furnish any written
statement required to be provided to a re-
portable death benefits payment recipient
no later than January 31 of the year fol-
lowing the calendar year in which the re-
portable policy sale occurs. The proposed
regulations use January 31 because it is
generally the deadline for furnishing cop-
ies of Form 1099-R to recipients.
Section 1.6050Y-4(d) of the proposed
regulations requires the payor to correct
returns filed under section 6050Y(c)(1)
and written statements furnished under
section 6050Y(c)(2) within 15 days of the
payor’s receipt of notice of the rescission
of the related reportable policy sale.
Section 1.6050Y-4(e) of the proposed
regulations sets forth exceptions to report-
ing under section 6050Y(c) that may apply
to payors. These exceptions are described
in the next section of this Explanation of
Provisions.
Section 1.6050Y-4(f) of the proposed
regulations describes the penalty provi-
sions applicable when a person is required
under section 6050Y(c) to file an infor-
mation return, or furnish a written state-
ment, but fails to do so on or before the
prescribed date, fails to include all of the
information required to be shown, or in-
cludes incorrect information.
5. Exceptions to Reporting under Section
6050Y
The proposed regulations include cer-
tain exceptions to the reporting require-
ments otherwise imposed on acquirers,
6050Y(b) issuers, and payors under
§§1.6050Y-2, -3, and -4 of the proposed
regulations, respectively. These excep-
tions to reporting are similar in their in-
tended purposes to exceptions included in
regulations issued under other sections in
chapter 61 that except reporting by certain
payors and brokers (as applicable based on
the section) with respect to a transaction
occurring outside the United States when
no nexus of the transaction to the United
States is identified (under criteria spec-
ified in each of the regulations). For ex-
ample, §1.6045-1 generally requires bro-
kers to report the proceeds of certain sales
(such as sales of securities) on a Form
1099-B, Proceeds from Broker and Bar-
ter Exchange Transactions, but includes
an exception to the term “broker” that ap-
plies to most non-U.S. securities brokers
for sales that are effected outside of the
United States within the meaning provid-
ed in those regulations. See §1.6045-1(a)
and (g)(3)(iii). Reporting of payments un-
der several of the sections in chapter 61 is
also excepted when a payor or broker is
permitted to treat the person receiving the
payments as a foreign person. For certain
of those excepted payments, withholding
and reporting requirements may instead
apply under chapter 3 of subtitle A of the
Code.
Sections 1.6050Y-2(f) and 1.6050Y-3(f)
(2) of the proposed regulations describe
exceptions to the reporting otherwise re-
quired of an acquirer and 6050Y(b) issuer
under section 6050Y(a) or (b), respective-
ly, for cases in which the Treasury Depart-
ment and the IRS are of the view that a
nexus of the sale or life insurance contract
to the United States is insufficient for ap-
plying the reporting provisions of those
sections.
Sections 1.6050Y-3(f)(1) and
1.6050Y-4(e)(1) of the proposed regula-
tions provide that reporting under sec-
tion 6050Y(b) or (c) is not required by
6050Y(b) issuers and payors with respect
to sellers or reportable death benefits pay-
ment recipients, respectively, documented
as foreign beneficial owners under the
requirements of the regulations under
section 1441. The proposed regulations
include, however, two modifications to
those requirements. First, §§1.6050Y-3(f)
(1) and 1.6050Y-4(e)(1) of the proposed
regulations permit a 6050Y(b) issuer or
payor to treat a partnership or trust as a
foreign beneficial owner provided that the
6050Y(b) issuer or payor obtains a writ-
ten certification from the partnership or
trust that no beneficial owner (within the
meaning of §1.1441-1(c)(6)(ii)) of any
portion of the sales proceeds or report-
able death benefits payment (as applica-
ble based on the section) received by the
partnership or trust is a United States per-
son, as well as documentation establishing
the partnership’s or trust’s foreign status.
The treatment described in the preceding
sentence does not apply, however, when
the issuer or payor has actual knowledge
that a United States person is a beneficial
owner of all or a portion of the sale pro-
ceeds or reportable death benefit payment.
Second, §1.6050Y-3(f)(1) of the proposed
regulations provides that this exception
does not apply to a foreign beneficial
owner for which the sale of the insurance
contract (or interest therein) results in a
requirement to report any of the income
from the sale as effectively connected
with a U.S. trade or business. To address
those cases, the proposed regulations pro-
vide that a seller required to report any of
the income from the sale of an insurance
contract (or interest therein) as effectively
connected with the conduct of a trade or
business in the United States under sec-
tion 864(b) must provide to the 6050Y(b)
issuer a Form W-8ECI, Certificate of For-
eign Person’s Claim that Income is Ef-
fectively Connected with the Conduct of
a Trade or Business in the United States.
The proposed regulations do not permit
a 6050Y(b) issuer to apply the exception
when it receives a Form W-8ECI from a
seller or has reason to know that the sell-
er is required to report any of the sale
proceeds as income effectively connect-
ed with a U.S. trade or business. Similar
provisions apply with respect to foreign
beneficial owners of reportable death ben-

Bulletin No. 2019–17 1053 April 22, 2019
efits under §1.6050Y-4(e)(1) of the pro-
posed regulations. However, in response
to comments received on Notice 2018-41,
the Treasury Department and the IRS are
considering whether payors required un-
der section 6050Y(c) and §1.6050Y-4(e)
(1) of the proposed regulations to report
payments of reportable death benefits that
are income effectively connected with a
U.S. trade or business may satisfy their re-
porting obligation under section 6050Y(c)
by filing a Form 1042-S, Foreign Person’s
U.S. Source Income Subject to Withhold-
ing, or if such payors may be relieved
from the obligation to report some of the
information required to be reported under
section 6050Y(c).
Section 1.6050Y-4(e)(2) of the pro-
posed regulations also includes a report-
ing exception for death benefits paid
under an insurance contract (or interest
therein) held by a buyer that obtained the
contract or interest in a reportable policy
sale that was within an exception to re-
porting described in §1.6050Y-3(f)(2) of
the proposed regulations. The exception to
reporting described in §1.6050Y-3(f)(2) of
the proposed regulations applies in those
cases in which a 6050Y(b) issuer received
only a notice of transfer to a foreign per-
son and, because the requirements set
forth in §1.6050Y-3(f)(2)(i) through (iii)
of the proposed regulations were met, was
not required to treat the transfer as report-
able for purposes of section 6050Y(b).
6. Section 1.101-1: Exclusion from Gross
Income of Proceeds of Life Insurance
Contracts Payable by Reason of Death
Generally, amounts received under a
life insurance contract that are paid by rea-
son of the death of the insured are exclud-
ed from federal income tax under section
101(a)(1). However, if a life insurance
contract is sold or otherwise transferred
for valuable consideration, the “transfer
for value rule” set forth in section 101(a)
(2) limits the excludable portion of the
amount paid by reason of the death of the
insured. Section 101(a)(2) provides that
the excludable amount following a transfer
for valuable consideration generally may
not exceed the sum of (1) The actual value
of the consideration paid by the transferee
to acquire the life insurance contract and
(2) the premiums and other amounts sub-
sequently paid by the transferee. Section
101(a)(2) provides two exceptions to this
transfer for value rule. Specifically, the
limitation set forth in section 101(a)(2)
does not apply if (1) The transferee’s ba-
sis in the contract is determined in whole
or in part by reference to the transferor’s
basis in the contract or (2) the transfer is
to the insured, to a partner of the insured,
to a partnership in which the insured is a
partner, or to a corporation in which the
insured is a shareholder or officer.
Section 13522 of the Act added section
101(a)(3) to the Code. Section 101(a)(3)
(A) provides that these two exceptions
shall not apply in the case of a transfer of
a life insurance contract, or any interest
therein, that is a reportable policy sale.
Section 101(a)(3)(B) defines the term
“reportable policy sale” to mean the ac-
quisition of an interest in a life insurance
contract, directly or indirectly, if the ac-
quirer has no substantial family, business,
or financial relationship with the insured
apart from the acquirer’s interest in such
life insurance contract. For purposes of
the preceding sentence, the term “indirect-
ly” applies to the acquisition of an interest
in a partnership, trust, or other entity that
holds an interest in the life insurance con-
tract.
The proposed regulations update
§1.101-1(a)(1) of the existing regulations
to reflect the repeal of section 101(b)
(treatment of employees’ death benefits)
in 1996, and the addition of section 7702
(definition of life insurance contract) in
1984, section 101(j) (treatment of certain
employer-owned life insurance contracts)
in 2006, and section 101(a)(3) (exception
to valuable consideration rules for report-
able policy sales) in 2017. The proposed
regulations remove the second and third
sentences of §1.101-1(a)(1) of the existing
regulations and add a sentence at the end
of §1.101-1(a)(1) to address the earlier
changes in law. To address the changes in
law made by the Act, the proposed regu-
lations under section 101 provide updated
rules for determining the amount of death
benefits excluded from gross income fol-
lowing a transfer for value or gratuitous
transfer, including a reportable policy
sale, and provide definitions applicable
under section 101. The proposed regula-
tions under section 6050Y adopt the rele-
vant definitions by cross-reference.
The proposed regulations provide that
any transfer of an interest in a life insurance
contract for cash or other consideration re-
ducible to a money value is a transfer for
valuable consideration. See §1.101-1(f)
(5) of the proposed regulations; see also
§25.2512-8 (“[a] consideration not re-
ducible to a value in money or money’s
worth, as love and affection, promise of
marriage, etc., is to be wholly disregard-
ed”). An interest in a life insurance con-
tract (also referred to as a life insurance
policy) is held by any person that has tak-
en title to or possession of the life insur-
ance contract, in whole or part, for state
law purposes, including any person that
has taken title or possession as nominee
for another person, or by any person that
has an enforceable right to receive all or a
part of the proceeds of the life insurance
contract or to any other economic bene-
fits of the insurance policy as described in
§20.2042-1(c)(2). See §1.101-1(e)(1) of
the proposed regulations. The enforceable
right to designate a contract beneficiary is
an interest in a life insurance contract. Id.
Any person named as the owner in a life
insurance contract generally is the owner
(or an owner) of the contract and holds an
interest in the contract. Id.
The transfer of an interest in a life in-
surance contract includes the transfer of
any interest in the life insurance contract
as well as any transfer of the life insurance
contract itself (meaning a transfer of title
to, possession of, or legal or beneficial
ownership of the life insurance contract).
See §1.101-1(e)(2) of the proposed reg-
ulations. For instance, the creation of an
enforceable right to receive all or a part of
the proceeds of a life insurance contract
constitutes the transfer of an interest in the
life insurance contract. Id. However, the
revocable designation of a beneficiary of
the policy proceeds does not constitute a
transfer of an interest in a life insurance
contract to the beneficiary until the desig-
nation becomes irrevocable other than by
reason of the death of the insured. Id. For
purposes of this rule, a beneficiary desig-
nation is not revocable if the person with
the right to designate the beneficiary of
the contract has an enforceable contrac-
tual obligation to designate a particular
contract beneficiary. The pledging or as-
signment of a policy as collateral securi-
ty also is not a transfer of an interest in

April 22, 2019 1054 Bulletin No. 2019–17
a life insurance contract. Id. In response
to comments received on Notice 2018-41
suggesting that the initial owner of a life
insurance contract should not be consid-
ered an “acquirer” for purposes of section
6050Y(a), §1.101-1(e)(2) of the proposed
regulations clarifies that the issuance of a
life insurance contract to a policyholder,
other than the issuance of a policy in an
exchange pursuant to section 1035, is not
a transfer of an interest in a life insurance
contract.
Section 1.101-1(b)(1)(i) of the pro-
posed regulations provides that, in the
case of a transfer of an interest in a life
insurance contract for valuable consider-
ation, the amount of the proceeds attrib-
utable to the interest that is excludable
from gross income under section 101(a)
(1) is limited under section 101(a)(2) to
the sum of the actual value of the consid-
eration for the transfer paid by the trans-
feree and the premiums and other amounts
subsequently paid by the transferee with
respect to that interest. Consistent with
section 101(a)(3), this general rule applies
to all transfers of interests in life insur-
ance contracts for valuable consideration
that are reportable policy sales. Consistent
with section 101(a)(2), this general rule
also continues to apply to transfers of in-
terests in life insurance contracts for valu-
able consideration that are not reportable
policy sales, unless an exception set forth
in section 101(a)(2) applies. See §1.101-
1(b)(1)(i) and (ii) of the proposed regula-
tions. Section 1.101-1(b)(1)(ii)(A) of the
proposed regulations applies to carryover
basis transfers that are not also subject to
§1.101-1(b)(1)(ii)(B) of the proposed reg-
ulations. Section 1.101-1(b)(1)(ii)(B) of
the proposed regulations applies to trans-
fers to certain persons.
Under §1.101-1(b)(1)(ii)(A) of the pro-
posed regulations, the limitation described
in section 101(a)(2) and §1.101-1(b)(1)(i)
of the proposed regulations does not apply
to the transfer of an interest in a life insur-
ance contract for valuable consideration if
(1) The transfer is not a reportable poli-
cy sale, (2) the basis of the interest trans-
ferred, for the purpose of determining gain
or loss with respect to the transferee, is de-
terminable in whole or in part by reference
to the basis of that interest in the hands of
the transferor, and (3) §1.101-1(b)(1)(ii)
(B) of the proposed regulations does not
apply to the transfer. The amount of the
proceeds attributable to the interest that is
excludable from gross income under sec-
tion 101(a)(1) is, however, limited to the
sum of (1) The amount that would have
been excludable by the transferor, and (2)
the premiums and other amounts subse-
quently paid by the transferee.
This limitation applies without regard
to whether the interest previously has
been transferred or to the nature of any
prior transfer of the interest. For instance,
it is irrelevant whether a prior transfer
was gratuitous or for value, whether sec-
tion 101(a)(2)(A) or (B) applied to a prior
transfer, whether any prior transfer was a
reportable policy sale, or whether the pri-
or transfer was of the same interest or a
larger interest in a life insurance contract
that included the same interest. If the full
amount of the proceeds would have been
excludable by the transferor, as would
generally be the case if the original poli-
cyholder is the transferor, §1.101-1(b)(1)
(ii)(A) of the proposed regulations will, as
a practical matter, impose no limitation on
the amount of the proceeds attributable to
the interest that is excludable from gross
income under section 101(a)(1).
Under §1.101-1(b)(1)(ii)(B)(1) of the
proposed regulations, the limitation on
the excludable amount of the proceeds de-
scribed in section 101(a)(2) and §1.101-
1(b)(1)(i) of the proposed regulations will
not apply to an interest in a life insurance
contract that is transferred for valuable
consideration if (1) The transfer is not
a reportable policy sale and the interest
was not previously transferred for valu-
able consideration in a reportable policy
sale, and (2) the transfer is to the insured,
a partner of the insured, a partnership in
which the insured is a partner, or a corpo-
ration in which the insured is a sharehold-
er or officer (a (B)(1) person).
Under §1.101-1(b)(1)(ii)(B)(2) of the
proposed regulations, if a transfer of an
interest in a life insurance contract to a (B)
(1) person follows a transfer for valuable
consideration in a reportable policy sale
(whether in the immediately preceding
transfer or an earlier transfer), the amount
of the proceeds attributable to that inter-
est that is excludable from gross income
under section 101(a)(1) is limited to the
sum of (1) The higher of the amount that
would have been excludable by the trans-
feror if the transfer to the (B)(1) person
had not occurred or the actual value of
the consideration for the transfer to the
(B)(1) person paid by the (B)(1) person,
and (2) the premiums and other amounts
subsequently paid by the transferee. Thus,
in determining the excludable amount of
the proceeds attributable to an interest in
a life insurance contract that is transferred
to a (B)(1) person in a transfer that is not
a reportable policy sale, the limitation de-
scribed in section 101(a)(2) and §1.101-
1(b)(1)(i) of the proposed regulations is
inapplicable unless the interest previous-
ly had been transferred in a reportable
policy sale. Additionally, because of the
alternative in the formula for computing
the limitation, a (B)(1) person will not be
subject to a less favorable limitation than
the limitation applicable to a transferee in
a carryover basis transfer eligible for the
exception set forth in §1.101-1(b)(1)(ii)
(A) of the proposed regulations.
The proposed regulations provide a
single rule applicable to all gratuitous
transfers of interests in life insurance con-
tracts, including reportable policy sales
that are not for valuable consideration: the
amount of the proceeds attributable to the
interest that is excludable from gross in-
come under section 101(a)(1) is limited to
the sum of (1) The amount of the proceeds
attributable to the gratuitously transferred
interest that would have been excludable
by the transferor if the transfer had not
occurred, and (2) the premiums and other
amounts subsequently paid by the trans-
feree. See §1.101-1(b)(2)(i) of the pro-
posed regulations. Although §1.101-1(b)
(2) of the existing regulations provides a
special rule for gratuitous transfers made
by or to the insured, a partner of the in-
sured, a partnership in which the insured
is a partner, or a corporation in which the
insured is a shareholder or officer, such a
rule is not required by section 101(a), and
the proposed regulations do not contain a
special rule for these transfers because it
could be subject to abuse.
Section 1.101-1(b)(3) of the proposed
regulations clarifies that, for purposes of
§1.101-1(b)(1) and (2) of the proposed
regulations, in determining the amounts,
if any, of consideration paid by the trans-
feree for the transfer of an interest in a
life insurance contract and premiums and
other amounts subsequently paid by the

Bulletin No. 2019–17 1055 April 22, 2019
transferee with respect to that interest,
the amounts paid by the transferee are
reduced, but not below zero, by amounts
received by the transferee under the life
insurance contract that are not received
as an annuity, to the extent excludable
from gross income under section 72(e).
This provision is necessary to prevent an
exclusion from gross income based on a
double-counting of consideration paid.
Section 1.101-1(c) of the proposed
regulations defines the term “reportable
policy sale,” which was introduced in sec-
tion 101(a)(3). The proposed regulations
provide that, as a general matter, any di-
rect or indirect acquisition of an interest
in a life insurance contract is a “reportable
policy sale” if the acquirer has, at the time
of the acquisition, no substantial family,
business, or financial relationship with the
insured apart from the acquirer’s interest
in that life insurance contract. See §1.101-
1(c)(1) of the proposed regulations.
Under §1.101-1(e)(3)(i) of the pro-
posed regulations, the transfer of an in-
terest in a life insurance contract results
in the direct acquisition of the interest by
the transferee (acquirer). Under §1.101-
1(e)(3)(ii) of the proposed regulations, an
indirect acquisition of an interest in a life
insurance contract occurs when a person
(acquirer) becomes a beneficial owner of
a partnership, trust, or other entity that
holds (directly or indirectly) an interest
in the life insurance contract. For this
purpose, the term “other entity” does not
include a C corporation (as that term is de-
fined in section 1361(a)(2)), unless more
than 50 percent of the gross value of the
assets of the C corporation (as determined
under §1.101-1(f)(4)) consists of life in-
surance contracts immediately before the
indirect acquisition. Under §1.101-1(f)(1)
of the proposed regulations, a “beneficial
owner” of a partnership, trust, or other en-
tity is an individual or C corporation with
an ownership interest in that partnership,
trust, or other entity. The beneficial own-
er’s interest may be held directly or indi-
rectly, through one or more other partner-
ships, trusts, or other entities.
Accordingly, under §1.101-1(e)(3)(ii)
of the proposed regulations, persons that
acquire shares in a C corporation that
holds an interest in a life insurance con-
tract generally will not be considered to
have an indirect acquisition of an interest
in such contract. However, if the C cor-
poration primarily owns life insurance
contracts (or interests therein), any person
that acquires shares in the C corporation
will be considered to have an indirect ac-
quisition of an interest in any life insur-
ance contract held by the C corporation.
Section 1.101-1(d) of the proposed
regulations defines the terms “substantial
family relationship,” “substantial business
relationship,” and “substantial financial
relationship.” Under section 1.101-1(d)(1)
of the proposed regulations, a “substantial
family relationship” is the relationship be-
tween an individual and any family mem-
ber of that individual as defined in §1.101-
1(f)(3) of the proposed regulations. A
substantial family relationship also exists
between an individual and his or her for-
mer spouse with regard to a transfer of
an interest in a life insurance contract to
(or in trust for the benefit of) that former
spouse incident to divorce. See §1.101-
1(d)(1) of the proposed regulations. Addi-
tionally, a substantial family relationship
exists between the insured and an entity if
all of the entity’s beneficial owners have
a substantial family relationship with the
insured. Id.
Section 1.101-1(d)(2) describes the two
situations in which a substantial business
relationship exists between the acquirer
and insured: (1) The insured is a key per-
son (as defined in section 264) of, or ma-
terially participates (as defined in section
469 and the corresponding regulations) in,
an active trade or business as an owner,
employee, or contractor, and at least 80%
of that trade or business is owned (directly
or indirectly, through one or more part-
nerships, trusts, or other entities) by the
acquirer or the beneficial owners of the
acquirer, and (2) the acquirer acquires an
active trade or business and acquires the
interest in the life insurance contract ei-
ther as part of that acquisition or from a
person owning significant property leased
to the acquired trade or business or life
insurance policies held to facilitate the
succession of the ownership of the busi-
ness, if certain requirements are met. See
§1.101-1(d)(2)(i) and (ii) of the proposed
regulations.
Comments received on Notice 2018-
41 suggested that acquisitions of life in-
surance contracts, or interests therein, in
certain ordinary course business transac-
tions involving the acquisition of a trade
or business should not be considered re-
portable policy sales, including ordinary
course business transactions whereby one
trade or business acquires another trade or
business that owns life insurance on the
lives of former employees or directors.
The definition of substantial business rela-
tionship in §1.101-1(d)(2) of the proposed
regulations, as well as certain other pro-
visions in the proposed regulations, are
intended to exclude certain of these trans-
actions from the definition of reportable
policy sales.
Section 1.101-1(d)(3) of the proposed
regulations describes the three situations
in which a substantial financial relation-
ship exists between the insured and the
acquirer: (1) The acquirer (directly or
indirectly, through one or more partner-
ships, trusts, or other entities of which it is
a beneficial owner) has, or the beneficial
owners of the acquirer have, a common in-
vestment (other than the interest in the life
insurance contract) with the insured and
a buy-out of the insured’s interest in the
common investment by the co-investor(s)
after the insured’s death is reasonably
foreseeable; (2) the acquirer maintains the
life insurance contract on the life of the in-
sured to provide funds to purchase assets
or satisfy liabilities following the death of
the insured; or (3) the acquirer is an or-
ganization described in sections 170(c),
2055(a), and 2522(a) that previously re-
ceived financial support in a substantial
amount or significant volunteer support
from the insured. See §1.101-1(d)(3)(i)
through (iii) of the proposed regulations.
The proposed regulations also specify
that the fact that an acquirer is a partner
of the insured, a partnership in which the
insured is a partner, or a corporation in
which the insured is a shareholder or offi-
cer (all relationships that are covered by an
exception from the transfer for value rule)
is not sufficient to establish a substantial
business or financial relationship, nor is
such status required to establish a substan-
tial business or financial relationship. See
§1.101-1(d)(4)(ii) of the proposed reg-
ulations. The proposed regulations also
clarify that, for purposes of determining
whether the acquirer in an indirect acqui-
sition of an interest in a life insurance con-
tract has a substantial business or financial
relationship with the insured, the acquirer

April 22, 2019 1056 Bulletin No. 2019–17
will be deemed to have a substantial busi-
ness or financial relationship with the in-
sured if the direct holder of the interest in
the life insurance contract has a substan-
tial business or financial relationship with
the insured immediately before and after
the date the acquirer acquires its interest.
See §1.101-1(d)(4)(i) of the proposed reg-
ulations. Accordingly, the acquirer in an
indirect acquisition may establish a sub-
stantial business or financial relationship
with the insured based on the acquirer’s
own relationship with the insured or the
relationship between the insured and the
direct holder of the interest in the life in-
surance contract.
The proposed regulations also provide
several exceptions from the definition of
reportable policy sale. The proposed reg-
ulations provide that the transfer of an in-
terest in a life insurance contract between
certain related entities is not a reportable
policy sale. Specifically, a transfer be-
tween entities with the same beneficial
owners is not a reportable policy sale if
the ownership interest of each beneficial
owner in each entity does not vary by
more than a 20 percent ownership inter-
est. See §1.101-1(c)(2)(i) and (g)(10) of
the proposed regulations. Also, a transfer
between corporations that are members of
an affiliated group (as defined in section
1504(a)) that files a consolidated U.S. tax
return for the taxable year in which the
transfer occurs is not a reportable policy
sale. See §1.101-1(c)(2)(ii) of the pro-
posed regulations.
Finally, in response to comments re-
ceived on Notice 2018-41, certain indirect
acquisitions of life insurance contracts, or
interests in life insurance contracts, are
excepted from the definition of a report-
able policy sale. The limited definition of
“indirect acquisition” under §1.101-1(e)
(3)(ii) of the proposed regulations means
that shareholders acquiring an interest in a
C corporation that holds an interest in one
or more life insurance contracts will not
be considered to have an indirect acqui-
sition or reportable policy sale unless the
C corporation primarily owns life insur-
ance contracts (or interests therein). The
proposed regulations also provide an ex-
ception from the definition of a reportable
policy sale for an indirect acquisition of an
interest in a life insurance contract if the
direct holder of the interest acquired the
interest in a reportable policy sale and re-
ported the acquisition in compliance with
section 6050Y(a) and §1.6050Y-2 of the
proposed regulations. See §1.101-1(c)(2)
(iii)(A) of the proposed regulations. Also,
the indirect acquisition of an interest in a
life insurance contract is not a reportable
policy sale if (1) Immediately before the
acquisition, no more than 50 percent of the
gross value of the assets of the entity that
directly holds the interest in the life in-
surance contract consists of life insurance
contracts, and (2) the acquirer and his or
her family members own five percent or
less of the ownership interests in the entity
that directly holds the interest in the life
insurance contract. See §1.101-1(c)(2)(iii)
(B) of the proposed regulations. Section
1.101-1(f)(4) of the proposed regulations
provides rules regarding the determina-
tion of the gross value of assets for this
purpose.
Applicability Dates
The rules in §1.101-1(b) through (g) of
the proposed regulations are proposed to
apply, for purposes of section 6050Y, to
reportable policy sales made after Decem-
ber 31, 2017, and to reportable death ben-
efits paid after December 31, 2017. For
any other purpose, §1.101-1(b) through
(g) of the proposed regulations apply to
transfers of life insurance contracts, or
interests therein, made after the date the
Treasury decision adopting these regula-
tions as final regulations is published in
the Federal Register.
The rules in §1.6050Y-1 of the pro-
posed regulations are proposed to apply to
reportable policy sales made and report-
able death benefits paid after December
31, 2017. The rules in §§1.6050Y-2 and
1.6050Y-3 are proposed to apply to re-
portable policy sales made after Decem-
ber 31, 2017. The rules in §1.6050Y-4
are proposed to apply to reportable death
benefits paid after December 31, 2017.
See §1.6050Y-1(b) of the proposed regu-
lations.
For reportable policy sales and pay-
ments of reportable death benefits occur-
ring after December 31, 2017, and before
the date final regulations are published in
the Federal Register, §1.6050Y-1(b) of
the proposed regulations would provide
transition relief as follows:
1. With respect to reportable policy
sales occurring after December 31, 2017,
and before the date final regulations are
published in the Federal Register, state-
ments required to be furnished to issu-
ers under section 6050Y(a)(2) must be
furnished by the later of the applicable
deadline set forth in final regulations or
60 days after the date final regulations are
published in the Federal Register;
2. With respect to reportable policy
sales occurring after December 31, 2017,
and before the date final regulations are
published in the Federal Register, re-
turns required to be filed under section
6050Y(a)(1) and (b)(1) and statements
required to be furnished to payment recip-
ients and sellers under section 6050Y(a)
(2) and (b)(2) must be filed or furnished
by the later of the applicable deadline set
forth in final regulations or 90 days after
the date final regulations are published in
the Federal Register; and
3. With respect to payments of report-
able death benefits paid after December
31, 2017, and before the date final regula-
tions are published in the Federal Regis-
ter, returns required to be filed under sec-
tion 6050Y(c)(1) and statements required
to be furnished to payment recipients un-
der section 6050Y(c)(2) must be filed or
furnished by the later of the applicable
deadline set forth in final regulations or
90 days after the date final regulations are
published in the Federal Register.
Special Analyses
The proposed regulations are not sub-
ject to review under section 6(b) of Exec-
utive Order 12866 pursuant to the Mem-
orandum of Agreement (April 11, 2018)
between the Treasury Department and the
Office of Management and Budget regard-
ing review of tax regulations.
When the IRS issues a proposed
rulemaking imposing a requirement on
small entities, the Regulatory Flexibility
Act (RFA) requires the agency to “pre-
pare and make available for public com-
ment an initial regulatory flexibility anal-
ysis,” which will “describe the impact of
the proposed rule on small entities.” 5
U.S.C. 603(a). Section 605(b) of the RFA
allows an agency to certify a rule, in lieu
of preparing an analysis, if the proposed
rulemaking is not expected to have a sig-

Bulletin No. 2019–17 1057 April 22, 2019
nificant economic impact on a substantial
number of small entities.
Pursuant to the RFA, it is hereby certi-
fied that the proposed regulations will not
have a significant economic impact on a
substantial number of small entities. Sec-
tion 13520 of the Act added section 6050Y
to chapter 61 (Information and Returns) of
the Code. Section 6050Y imposes informa-
tion reporting obligations related to certain
life insurance contract transactions, includ-
ing reportable policy sales and payments of
reportable death benefits. Section 6050Y
provides that each of the returns required by
section 6050Y is to be made “at such time
and in such manner as the Secretary shall
prescribe.” The proposed regulations under
section 6050Y would implement section
6050Y by specifying the manner in which
and time at which the information report-
ing obligations must be satisfied. Accord-
ingly, because the regulations are limited in
scope to time and manner of information
reporting and definitional information, the
economic impact of the proposal is ex-
pected to be minimal. In addition, the IRS
and the Treasury Department expect that
the reporting burden will fall primarily on
financial and insurance firms with annual
receipts greater than $38.5 million (see 13
CFR 121.201, sector 52 (finance and insur-
ance)). Therefore, because the Commis-
sioner of the IRS hereby certifies that the
proposed regulations will not have a sig-
nificant economic impact on a substantial
number of small entities, a regulatory flexi-
bility analysis is not required. The Treasury
Department and the IRS request comments
on the accuracy of this statement. Pursuant
to section 7805(f) of the Code, this notice
of proposed rulemaking will be submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small entities.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the “Addresses”
heading. The Treasury Department and
the IRS request comments on all aspects
of the proposed rules. The Treasury De-
partment and the IRS specifically request
comments on the following:
1. Whether the proposed regulations
should provide rules regarding the elec-
tronic furnishing of statements that differ
in any way from the rules regarding the
electronic furnishing of statements that
are set forth in §31.6051-1(j).
2. Information about the types and tim-
ing of payments made by acquirers in re-
portable policy sales, including the types
of ancillary costs and expenses paid in
reportable policy sales, the recipients of
those payments, and existing reporting re-
quirements applicable to those payments.
3. Whether, for purposes of report-
ing under section 6050Y(c), only issuers
should be considered payors of reportable
death benefits or whether payors should
be more broadly defined to include any
holder of an interest in a life insurance
contract that receives reportable death
benefits attributable to that interest and is
contractually obligated to pay them to the
beneficial owner of the interest.
4. Whether a substantial business rela-
tionship or substantial financial relation-
ship should be considered to exist between
the acquirer and insured for purposes of
section 101(a)(3) in any situation not in-
cluded in the definition of “substantial
business relationship” in §1.101-1(d)(2)
of the proposed regulations or the defini-
tion of “substantial financial relationship”
in §1.101-1(d)(3) of the proposed regula-
tions.
5. Whether the proposed regulations
should include additional provisions re-
garding the treatment of section 1035 ex-
changes of life insurance contracts.
6. Whether the exceptions to reporting
by 6050Y(b) issuers and payors under
§§1.6050Y-3(f)(1) and 1.6050Y-4(e)(1) of
the proposed regulations (covering sellers
and reportable death benefit payment re-
cipients documented as foreign beneficial
owners) are appropriate, including for cas-
es in which a foreign partnership or a for-
eign trust is the seller or reportable death
benefit payment recipient, and also wheth-
er the proposed reporting requirements
are duplicative or could be combined with
other reporting requirements.
All comments that are submitted by the
public will be available for public inspec-
tion and copying at www.regulations.gov
or upon request.
A public hearing has been scheduled
for June 5, 2019, at 10 a.m., in the IRS Au-
ditorium, Internal Revenue Service, 1111
Constitution Avenue NW, Washington,
DC. Due to building security procedures,
visitors must enter at the Constitution
Avenue entrance. In addition, all visitors
must present photo identification to enter
the building. Because of access restric-
tions, visitors will not be admitted beyond
the immediate entrance area more than
15 minutes before the hearing starts. For
more information about having your name
placed on the building access list to attend
the hearing, see the “FOR FURTHER
INFORMATION CONTACT” section of
this preamble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written or electronic comments
and an outline of the topics to be discussed
and the time to be devoted to each topic by
May 9, 2019. Such persons should submit
a signed paper original and eight (8) cop-
ies or an electronic copy. A period of 10
minutes will be allotted to each person for
making comments. An agenda showing
the scheduling of the speakers will be pre-
pared after the deadline for receiving out-
lines has passed. Copies of the agenda will
be available free of charge at the hearing.
Drafting Information
The principal author of these regula-
tions is Kathryn M. Sneade, Office of As-
sociate Chief Counsel (Financial Institu-
tions and Products), IRS. However, other
personnel from the Treasury Department
and the IRS participated in their develop-
ment.
Availability of IRS Documents
The IRS notice cited in this preamble is
published in the Internal Revenue Bulletin
(or Cumulative Bulletin) and is available
from the Superintendent of Documents,
U.S. Government Publishing Office,
Washington, DC 20402, or by visiting the
IRS website at www.irs.gov.
* * * * *
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:

April 22, 2019 1058 Bulletin No. 2019–17
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.101-1 is amended by:
1.Removing the second and third sen-
tences in paragraph (a)(1) and adding a
sentence at the end of the paragraph.
2.Revising paragraphs (b)(1) through
(3).
3.Removing paragraphs (b)(4) and (5).
4.Adding paragraphs (c) through (g).
The revisions and additions read as fol-
lows:
§1.101-1 Exclusion from gross income
of proceeds of life insurance contracts
payable by reason of death.
(a)(1) * * * If the life insurance con-
tract is an employer-owned life insurance
contract within the definition of section
101(j)(3), the amount to be excluded from
gross income may be affected by the pro-
visions of section 101(j).
* * * * *
(b) * * * (1) Transfer of an interest
in a life insurance contract for valuable
consideration—(i) In general. In the case
of a transfer of an interest in a life insur-
ance contract for valuable consideration,
including a reportable policy sale for
valuable consideration, the amount of the
proceeds attributable to the interest that
is excludable from gross income under
section 101(a)(1) is limited under section
101(a)(2) to the sum of the actual value
of the consideration for the transfer paid
by the transferee and the premiums and
other amounts subsequently paid by the
transferee with respect to the interest. For
exceptions to this general rule for certain
transfers for valuable consideration that
are not reportable policy sales, see para-
graph (b)(1)(ii) of this section. The appli-
cation of section 101(d), (f), or (j), which
is not addressed in paragraph (b) of this
section, may further limit the amount of
the proceeds excludable from gross in-
come.
(ii) Exceptions—(A) Exception for
carryover basis transfers. The limitation
described in paragraph (b)(1)(i) of this
section does not apply to the transfer of
an interest in a life insurance contract for
valuable consideration if each of the fol-
lowing requirements are satisfied. First,
the transfer is not a reportable policy sale.
Second, the basis of the interest, for the
purpose of determining gain or loss with
respect to the transferee, is determinable
in whole or in part by reference to the ba-
sis of the interest in the hands of the trans-
feror (see section 101(a)(2)(A)). Third,
paragraph (b)(1)(ii)(B) of this section
does not apply. In the case of a transfer
described in this paragraph (b)(1)(ii)(A),
the amount of the proceeds attributable to
the interest that is excludable from gross
income under section 101(a)(1) is limited
to the sum of the amount that would have
been excludable by the transferor if the
transfer had not occurred and the premi-
ums and other amounts subsequently paid
by the transferee. The preceding sentence
applies without regard to whether the in-
terest previously has been transferred and
the nature of any prior transfer of the in-
terest.
(B) Exception for transfers to certain
persons—(1) In general. The limitation
described in paragraph (b)(1)(i) of this
section does not apply to the transfer of
an interest in a life insurance contract for
valuable consideration if both of the fol-
lowing requirements are satisfied. First,
the transfer is not a reportable policy sale
and the interest was not previously trans-
ferred for valuable consideration in a re-
portable policy sale. Second, the interest
is transferred to the insured, a partner of
the insured, a partnership in which the
insured is a partner, or a corporation in
which the insured is a shareholder or offi-
cer (see section 101(a)(2)(B)).
(2) Transfers to certain persons sub-
sequent to a reportable policy sale. If a
transfer of an interest in a life insurance
contract would be described in paragraph
(b)(1)(ii)(B)(1) of this section, but for
the fact that the interest was previously
transferred for valuable consideration in a
reportable policy sale (whether in the im-
mediately preceding transfer or an earlier
transfer), then the amount of the proceeds
attributable to the interest that is exclud-
able from gross income under section
101(a)(1) is limited to the sum of—
(i) The higher of the amount that would
have been excludable by the transferor if
the transfer had not occurred or the actual
value of the consideration for the transfer
paid by the transferee; and
(ii) The premiums and other amounts
subsequently paid by the transferee.
(2) Other transfers—(i) Gratuitous
transfer of an interest in a life insurance
contract. To the extent that a transfer of
an interest in a life insurance contract is
gratuitous, including a reportable policy
sale that is not for valuable consideration,
the amount of the proceeds attributable to
the interest that is excludable from gross
income under section 101(a)(1) is limited
to the sum of the amount of the proceeds
attributable to the gratuitously transferred
interest that would have been exclud-
able by the transferor if the transfer had
not occurred and the premiums and other
amounts subsequently paid by the trans-
feree.
(ii) Partial transfers. When only part
of an interest in a life insurance contract
is transferred, the transferor’s exclusion
is ratably apportioned among the several
parts. If multiple parts of an interest are
transferred, the transfer of each part is
treated as a separate transaction, with each
transaction subject to the rule under para-
graph (b) of this section that is appropriate
to the type of transfer involved.
(iii) Bargain sales. When the transfer
of an interest in a life insurance contract is
in part a sale and in part a gratuitous trans-
fer, the transfer of each part is treated as
a separate transaction for purposes of de-
termining the amount of the proceeds at-
tributable to the interest that is excludable
from gross income under section 101(a)
(1). Each separate transaction is subject to
the rule under paragraph (b) of this section
that is appropriate to the type of transfer
involved.
(3) Determination of amounts paid by
the transferee. For purposes of paragraphs
(b)(1) and (2) of this section, in determin-
ing the amounts, if any, of consideration
paid by the transferee for the transfer of
an interest in a life insurance contract
and premiums and other amounts subse-
quently paid by the transferee with respect
to that interest, the amounts paid by the
transferee are reduced, but not below zero,
by amounts received by the transferee un-
der the life insurance contract that are not
received as an annuity, to the extent ex-
cludable from gross income under section
72(e).
(c) Reportable policy sale—(1) In gen-
eral. Except as provided in paragraph (c)

Bulletin No. 2019–17 1059 April 22, 2019
(2) of this section, a reportable policy sale
for purposes of this section and section
6050Y is any direct or indirect acquisition
of an interest in a life insurance contract
if the acquirer has, at the time of the ac-
quisition, no substantial family, business,
or financial relationship with the insured
apart from the acquirer’s interest in the
life insurance contract.
(2) Exceptions. None of the following
transactions is a reportable policy sale:
(i) A transfer of an interest in a life in-
surance contract between entities with the
same beneficial owners, if the ownership
interest of each beneficial owner in the
transferor entity does not vary by more
than a 20 percent ownership interest from
that beneficial owner’s ownership inter-
est in the transferee entity. In a series of
transfers, the prior sentence is applied by
comparing the beneficial owners’ owner-
ship interest in the first transferor entity
and the last transferee entity. For purposes
of this paragraph (c)(2)(i), each beneficial
owner of a trust is deemed to have an own-
ership interest determined by the broadest
possible exercise of a trustee’s discretion
in that beneficial owner’s favor. Example
10 in paragraph (g)(10) of this section pro-
vides an illustration of the application of
this paragraph (c)(2)(i).
(ii) A transfer between corporations
that are members of an affiliated group (as
defined in section 1504(a)) that files a con-
solidated U.S. income tax return for the
taxable year in which the transfer occurs.
(iii) The indirect acquisition of an in-
terest in a life insurance contract by a per-
son if—
(A) The partnership, trust, or other en-
tity that directly holds the interest in the
life insurance contract acquired that in-
terest in a reportable policy sale reported
in compliance with section 6050Y(a) and
§1.6050Y-2; or
(B) Immediately before the acquisi-
tion, no more than 50 percent of the gross
value of the assets (as determined under
paragraph (f)(4) of this section) of the
partnership, trust, or other entity that di-
rectly holds the interest in the life insur-
ance contract consists of life insurance
contracts, and with respect to that partner-
ship, trust, or other entity, the person indi-
rectly acquiring the interest in the contract
(acquirer) and his or her family members
own, in the aggregate—
(1) With respect to an S corporation,
stock possessing 5 percent or less of the
total combined voting power of all classes
of stock entitled to vote and 5 percent or
less of the total value of shares of all class-
es of stock of the S corporation;
(2) With respect to a trust or decedent’s
estate, 5 percent or less of the corpus and
5 percent or less of the annual income
(taking into account, for the purpose of
determining any person’s ownership inter-
est, the maximum amount of income and
corpus that could be distributed to or held
for the benefit of that person); or
(3) With respect to a partnership or oth-
er entity that is not a corporation or a trust,
5 percent or less of the capital interest and
5 percent or less of the profits interest.
(d) Substantial relationship—(1) Sub-
stantial family relationship. For purposes
of this section, a substantial family rela-
tionship means the relationship between
an individual and any family member of
that individual as defined in paragraph (f)
(3) of this section. In addition, a substan-
tial family relationship exists between an
individual and his or her former spouse
with regard to the transfer of an interest in
a life insurance contract to (or in trust for
the benefit of) that former spouse incident
to divorce. A substantial family relation-
ship also exists between the insured and a
partnership, trust, or other entity if all of
the beneficial owners of that partnership,
trust, or other entity have a substantial
family relationship with the insured. For
example, a substantial family relationship
exists between the insured and an entity
that acquires an interest in a life insurance
contract on the insured’s life if the insured
is the sole beneficial owner of the entity
or each beneficial owner of the entity is
either the insured or a family member of
the insured.
(2) Substantial business relationship.
For purposes of this section, a substantial
business relationship between the insured
and the acquirer exists in each of the fol-
lowing situations:
(i) The insured is a key person (as
defined in section 264) of, or materially
participates (within the meaning of sec-
tion 469) in, an active trade or business
as an owner, employee, or contractor, and
at least 80% of that trade or business is
owned (directly or indirectly, through one
or more partnerships, trusts, or other enti-
ties) by the acquirer or the beneficial own-
ers of the acquirer.
(ii) The acquirer acquires an active
trade or business and acquires the interest
in the life insurance contract either as part
of that acquisition or from a person own-
ing significant property leased to the ac-
quired trade or business or life insurance
policies held to facilitate the succession of
the ownership of the business if—
(A) The insured—
(1) Is an employee within the meaning
of section 101(j)(5)(A) of the acquired
trade or business immediately preceding
the acquisition; or
(2) Was a director, highly compen-
sated employee, or highly compensated
individual within the meaning of section
101(j)(2)(A)(ii) of the acquired trade or
business, and the acquirer, immediately
after the acquisition, has ongoing finan-
cial obligations to the insured with re-
spect to the insured’s employment by the
trade or business (for example, the life
insurance contract is maintained by the
acquirer to fund current or future retire-
ment, pension, or survivorship obliga-
tions based on the insured’s relationship
with the entity or to fund a buy-out of the
insured’s interest in the acquired trade or
business); and
(B) The acquirer either carries on the
acquired trade or business or uses a sig-
nificant portion of the acquired business
assets in an active trade or business that
does not include investing in interests in
life insurance contracts.
(3) Substantial financial relationship.
For purposes of this section, a substantial
financial relationship between the insured
and the acquirer exists in each of the fol-
lowing situations:
(i) The acquirer (directly or indirectly,
through one or more partnerships, trusts,
or other entities of which it is a beneficial
owner) has, or the beneficial owners of the
acquirer have, a common investment (oth-
er than the interest in the life insurance
contract) with the insured and a buy-out
of the insured’s interest in the common
investment by the co-investor(s) after the
insured’s death is reasonably foreseeable.
(ii) The acquirer maintains the life in-
surance contract on the life of the insured
to provide funds to purchase assets or sat-
isfy liabilities following the death of the
insured.

April 22, 2019 1060 Bulletin No. 2019–17
(iii) The acquirer is an organization
described in sections 170(c), 2055(a),
and 2522(a) that previously received fi-
nancial support in a substantial amount
or significant volunteer support from the
insured.
(4) Special rules. Paragraphs (d)(4)(i)
and (ii) of this section apply for purposes
of determining whether a substantial busi-
ness relationship exists under paragraph
(d)(2) of this section and for purposes of
determining whether a substantial finan-
cial relationship exists under paragraph
(d)(3) of this section.
(i) Indirect acquisitions. The acquirer
in an indirect acquisition of an interest in
a life insurance contract is deemed to have
a substantial business or financial relation-
ship with the insured if the direct holder of
the interest in the life insurance contract
has a substantial business or financial re-
lationship with the insured immediately
before and after the date the acquirer ac-
quires its interest.
(ii) Acquisitions by certain persons.
The sole fact that an acquirer is a partner
of the insured, a partnership in which the
insured is a partner, or a corporation in
which the insured is a shareholder or of-
ficer, is not sufficient to establish a sub-
stantial business or financial relationship
with the insured. In addition, an acquirer
need not be a partner of the insured, a part-
nership in which the insured is a partner,
or a corporation in which the insured is a
shareholder or officer to have a substantial
business or financial relationship with the
insured.
(e) Interest in a life insurance con-
tract—(1) Definition. For purposes of this
section and section 6050Y, the term inter-
est in a life insurance contract means the
interest held by any person that has taken
title to or possession of the life insurance
contract (also referred to as a life insurance
policy), in whole or part, for state law pur-
poses, including any person that has taken
title or possession as nominee for another
person, and the interest held by any person
that has an enforceable right to receive all
or a part of the proceeds of a life insurance
contract or to any other economic benefits
of the policy as described in §20.2042-1(c)
(2) of this chapter, such as the enforceable
right to designate a contract beneficiary.
Any person named as the owner in the life
insurance contract generally is the owner
(or an owner) of the contract and holds an
interest in the contract.
(2) Transfer of an interest in a life in-
surance contract. For purposes of this sec-
tion and section 6050Y, the term transfer
of an interest in a life insurance contract
means the transfer of any interest in the life
insurance contract, including any transfer
of title to, possession of, or legal or bene-
ficial ownership of the life insurance con-
tract itself. The creation of an enforceable
right to receive all or a part of the proceeds
of a life insurance contract constitutes the
transfer of an interest in the life insurance
contract. The following events are not a
transfer of an interest in a life insurance
contract: the revocable designation of a
beneficiary of the policy proceeds (until
the designation becomes irrevocable other
than by reason of the death of the insured);
the pledging or assignment of a policy as
collateral security; and the issuance of a
life insurance contract to a policyholder,
other than the issuance of a policy in an
exchange pursuant to section 1035.
(3) Acquisition of an interest in a life
insurance contract. For purposes of this
section and section 6050Y, the acquisition
of an interest in a life insurance contract
may be direct or indirect.
(i) Direct acquisition of an interest in
a life insurance contract. For purposes of
this section and section 6050Y, the trans-
fer of an interest in a life insurance con-
tract results in the direct acquisition of the
interest by the transferee (acquirer).
(ii) Indirect acquisition of an interest
in a life insurance contract. For purpos-
es of this section and section 6050Y, an
indirect acquisition of an interest in a life
insurance contract occurs when a person
(acquirer) becomes a beneficial owner of
a partnership, trust, or other entity that
holds (whether directly or indirectly) the
interest in the life insurance contract. For
purposes of this paragraph (e)(3)(ii), the
term other entity does not include a C
corporation, unless more than 50 percent
of the gross value of the assets of the C
corporation consists of life insurance con-
tracts (as determined under paragraph (f)
(4) of this section) immediately before the
indirect acquisition.
(f) Definitions. The following defini-
tions apply for purposes of this section:
(1) Beneficial owner. A beneficial own-
er of a partnership, trust, or other entity
is an individual or C corporation with an
ownership interest in that entity. The in-
terest may be held directly or indirectly,
through one or more other partnerships,
trusts, or other entities. For instance, an
individual that directly owns an inter-
est in a partnership (P1), which directly
owns an interest in another partnership
(P2), is an indirect beneficial owner of
P2 and any assets or other entities owned
by P2 directly or indirectly. For purpos-
es of this paragraph (f)(1), the beneficial
owners of a trust include those who may
receive current distributions of trust in-
come or corpus and those who could
receive distributions if the trust were to
terminate currently.
(2) C corporation. The term C corpo-
ration has the meaning given to it in sec-
tion 1361(a)(2).
(3) Family member. With respect to any
individual, the term family member refers
to any person described in paragraphs (f)
(3)(i) through (vii) of this section. For pur-
poses of this paragraph (f)(3), full effect is
given to a legal adoption, and a step-child
is deemed to be a descendant. The family
members of an individual include:
(i) The individual;
(ii) The individual’s spouse or a person
with whom the individual is in a registered
domestic partnership, civil union, or oth-
er similar relationship established under
state law;
(iii) Any parent, grandparent, or
great-grandparent of the individual or of
the person described in paragraph (f)(3)
(ii) of this section and any spouse of such
parent, grandparent, or great-grandparent,
or person with whom the parent, grand-
parent, or great-grandparent is in a reg-
istered domestic partnership, civil union,
or other similar relationship established
under state law;
(iv) Any lineal descendant of the indi-
vidual or of any person described in para-
graph (f)(3)(ii) or (iii) of this section;
(v) Any spouse of a lineal descendant
described in paragraph (f)(3)(iv) of this
section and any person with whom such a
lineal descendant is in a registered domes-
tic partnership, civil union, or other sim-
ilar relationship established under state
law;
(vi) Any lineal descendant of a person
described in paragraph (f)(3)(v) of this
section; and

Bulletin No. 2019–17 1061 April 22, 2019
(vii) Any trust established and main-
tained for the primary benefit of the indi-
vidual or one or more persons described
in paragraph (f)(3)(i) through (vi) of this
section.
(4) Gross value of assets—(i) Deter-
mination of gross value of assets. Except
as otherwise provided in paragraph (f)(4)
(ii) and (iii) of this section, for purposes of
paragraphs (c)(2)(iii)(B) and (e)(3)(ii) of
this section, the term gross value of assets
means, with respect to any entity, the fair
market value of the entity’s assets.
(ii) Determination of gross value of as-
sets of publicly traded entity. For purposes
of determining the gross value of assets
of an entity that is publicly traded, if the
entity’s annual Form 10-K filed with the
United States Securities and Exchange
Commission (or equivalent annual filing if
the entity is publicly traded in a non-U.S.
jurisdiction) for the period immediate-
ly preceding a person’s acquisition of an
ownership interest in the entity does not
contain information demonstrating that
more than 50 percent of the gross value
of the entity’s assets consist of life insur-
ance contracts, that person may assume
that no more than 50 percent of the gross
value of the entity’s assets consist of life
insurance contracts, unless that person has
actual knowledge or reason to know that
more than 50 percent of the gross value of
the entity’s assets consist of life insurance
contracts.
(iii) Safe harbor definition of gross
value of assets. An entity may choose to
determine the gross value of all the enti-
ty’s assets for purposes of this section us-
ing the following alternative definition of
gross value of assets:
(A) In the case of assets that are life
insurance policies or annuity or endow-
ment contracts that have cash values, the
cash surrender value as defined in section
7702(f)(2)(A); and
(B) In the case of assets not described
in paragraph (f)(4)(iii)(A) of this section,
the adjusted bases (within the meaning of
section 1016) of such assets.
(5) Transfer for valuable consider-
ation. A transfer for valuable consider-
ation means any transfer of an interest in
a life insurance contract for cash or other
consideration reducible to a money value.
(g) Examples. The application of this
section is illustrated by the following ex-
amples, all of which assume that the trans-
feree did not receive any amounts under
the life insurance contract other than the
amounts described in the examples:
(1) Example 1. A is the initial policyholder of
a $100,000 insurance policy on A’s life. A sells the
policy to B, A’s child, for $6,000, its fair market
value. B is not a partner in a partnership in which
A is a partner. B receives the proceeds of $100,000
upon the death of A. Because the transfer to B was
for valuable consideration, and none of the excep-
tions in paragraph (b)(1)(ii) of this section applies,
the amount of the proceeds B may exclude from
B’s gross income under this section is limited under
paragraph (b)(1)(i) of this section to $6,000 plus any
premiums and other amounts paid by B subsequent
to the transfer.
(2) Example 2. The facts are the same as in Ex-
ample 1 in paragraph (g)(1) of this section except
that, before A’s death, B gratuitously transfers the
policy back to A. A’s estate receives the proceeds of
$100,000 on A’s death. Because the transfer from B
to A is a gratuitous transfer, the amount of the pro-
ceeds A’s estate may exclude from gross income un-
der this section is limited under paragraph (b)(2)(i)
of this section to the sum of the amount B could have
excluded had the transfer back to A not occurred
($6,000 plus any premiums and other amounts paid
by B subsequent to the transfer to B, as described in
Example 1 in paragraph (g)(1) of this section) plus
any premiums and other amounts paid by A subse-
quent to the transfer to A.
(3) Example 3. The facts are the same as in Ex-
ample 1 in paragraph (g)(1) of this section except
that, before A’s death, B sells the policy back to A for
its fair market value. A’s estate receives the proceeds
of $100,000 on A’s death. The transfer from A to B
is not a reportable policy sale because the acquirer B
has a substantial family relationship with the insured
A. The transfer from B to A is also not a reportable
policy sale because the acquirer A has a substantial
family relationship with the insured A. Accordingly,
paragraph (b)(1)(ii)(B)(1) of this section applies to
the transfer to A. The amount of the proceeds A’s es-
tate may exclude from gross income is not limited by
paragraph (b) of this section.
(4) Example 4. A is the initial policyholder of a
$100,000 insurance policy on A’s life. A transfers the
policy for $6,000, its fair market value, to an individ-
ual, C, who does not have a substantial family, busi-
ness, or financial relationship with A. The transfer
from A to C is a reportable policy sale. C receives the
proceeds of $100,000 on A’s death. The amount of
the proceeds C may exclude from C’s gross income
under this section is limited under paragraph (b)(1)
(i) of this section to $6,000 plus any premiums and
other amounts paid by C subsequent to the transfer.
(5) Example 5. The facts are the same as in Ex-
ample 4 in paragraph (g)(4) of this section, except
that before A’s death, C transfers the policy back to A
for $8,000, its fair market value. A’s estate receives
the proceeds of $100,000 on A’s death. The transfer
from C to A is not a reportable policy sale because
the acquirer A has a substantial family relationship
with the insured A. Because that transfer follows a
reportable policy sale (the transfer from A to C), the
amount of the proceeds that A’s estate may exclude
from gross income under this section is limited by
paragraph (b)(1)(ii)(B)(2) of this section to the sum
of—
(i) The higher of the amount C could have ex-
cluded had the transfer back to A not occurred
($6,000 plus any premiums and other amounts paid
by C subsequent to the transfer to C, as described
in Example 4 in paragraph (g)(4) of this section) or
the actual value of the consideration for that transfer
paid by A ($8,000); and
(ii) Any premiums and other amounts paid by A
subsequent to the transfer to A.
(6) Example 6. The facts are the same as in
Example 4 in paragraph (g)(4) of this section, ex-
cept that before A’s death, C gratuitously transfers
the policy to A. A’s estate receives the proceeds of
$100,000 on A’s death. Because the transfer from C
to A was gratuitous, the amount of the proceeds A’s
estate may exclude from gross income is limited un-
der paragraph (b)(2)(i) of this section to the sum of
the amount C could have excluded had the transfer
back to A not occurred ($6,000 plus any premiums
and other amounts paid by C subsequent to the trans-
fer to C, as described in Example 4 in paragraph (g)
(4) of this section), plus any premiums and other
amounts paid by A subsequent to the transfer back
to A.
(7) Example 7. A is the initial policyholder of a
$100,000 insurance policy on A’s life. A contributes
the policy to Corporation X in exchange for stock.
Corporation X’s basis in the policy is determinable
in whole or in part by reference to A’s basis in the
policy. Corporation X conducts an active trade or
business that it wholly owns, and A materially partic-
ipates in that active trade or business as an employee
of Corporation X. Corporation X receives the pro-
ceeds of $100,000 on A’s death. A’s contribution of
the policy to Corporation X is not a reportable policy
sale because Corporation X has a substantial busi-
ness relationship with A under paragraph (d)(2)(i) of
this section. Accordingly, under paragraph (b)(1)(ii)
(B)(1) of this section, Corporation X may exclude
the full amount of the proceeds from gross income
because Corporation X’s exclusion is not limited by
paragraph (b) of this section.
(8) Example 8. The facts are the same as in Exam-
ple 7 in paragraph (g)(7) of this section, except that
Corporation X transfers its active trade or business
and the policy on A’s life to Corporation Y in a tax-
free reorganization at a time when A is still employed
by Corporation X, but is no longer a shareholder of
Corporation X. Corporation Y’s basis in the policy
is determinable in whole or in part by reference to
Corporation X’s basis in the property, and Corpora-
tion Y carries on the trade or business acquired from
Corporation X. Corporation Y receives the proceeds
of $100,000 on A’s death. The transfer from Corpo-
ration X to Corporation Y is not a reportable policy
sale because Corporation Y has a substantial busi-
ness relationship with A under paragraph (d)(2)(ii) of
this section. The amount of the proceeds that Corpo-
ration Y may exclude from gross income is limited
under paragraph (b)(1)(ii)(A) of this section to the
sum of the amount that would have been excludable
by Corporation X had the transfer to Corporation
Y not occurred (the full amount of the proceeds, as
described in Example 7 in paragraph (g)(7) of this
section), plus any premiums and other amounts paid
by Corporation Y subsequent to the transfer. Accord-

April 22, 2019 1062 Bulletin No. 2019–17
ingly, Corporation Y may exclude the full amount of
the proceeds from gross income.
(9) Example 9. A is the initial policyholder of a
$100,000 insurance policy on A’s life. A contributes
the policy to a C corporation, Corporation W, in ex-
change for stock. Before and after the acquisition,
A and A’s family members own less than 5% of the
total combined voting power of all classes of Corpo-
ration W stock entitled to vote and less than 5% of
the total value of all classes of Corporation W stock.
Corporation W’s basis in the policy is determinable
in whole or in part by reference to A’s basis in the
property. However, no substantial family, business,
or financial relationship exists between A and Cor-
poration W. Corporation W receives the proceeds of
$100,000 on A’s death. A’s contribution of the policy
to Corporation W is a reportable policy sale. Under
paragraph (b)(1)(i) of this section, the amount of the
proceeds Corporation W may exclude from gross
income is limited to the actual value of the stock ex-
changed for the policy, plus any premiums and other
amounts paid by Corporation W subsequent to the
transfer.
(10) Example 10. Partnership X and Partnership
Y are owned by individuals A, B, and C. A holds 40%
of the capital and profits interest of Partnership X
and 20% of the capital and profits interest of Partner-
ship Y. B holds 35% of the capital and profits interest
of Partnership X and 40% of the capital and profits
interest of Partnership Y. C holds 25% of the capital
and profits interest of Partnership X and 40% of the
capital and profits interest of Partnership Y. Partner-
ship X is the initial policyholder of a $100,000 insur-
ance policy on the life of A. Partnership Y purchases
the policy from Partnership X. Under paragraph (c)
(2)(i) of this section, this transfer is not a reportable
policy sale because the ownership interest of each
beneficial owner in Partnership X does not vary from
that owner’s interest in Partnership Y by more than
a 20% ownership interest. A’s ownership varies by a
20% interest, B’s ownership varies by a 5% interest,
and C’s ownership varies by a 15% interest.
(11) Example 11. Partnership X conducts an ac-
tive trade or business and is the initial policyhold-
er of a $100,000 insurance policy on the life of its
full-time employee, A. A materially participates in
Partnership X’s active trade or business in A’s ca-
pacity as an employee. Individual B acquires a 10%
profits interest in Partnership X in exchange for a
cash payment of $1,000,000. Under paragraphs (d)
(1) through (3) of this section, B does not have a
substantial family, business, or financial relationship
with A. Under paragraph (d)(4)(i) of this section, B
is deemed to have a substantial business relationship
with A because, under paragraph (d)(2)(i) of this
section, Partnership X (the direct policyholder) has
a substantial business relationship with A. Accord-
ingly, although the acquisition of the 10% partner-
ship interest by B is an indirect acquisition of a 10%
interest in the insurance policy covering A’s life, the
acquisition is not a reportable policy sale.
(12) Example 12. The facts are the same as in
Example 11 in paragraph (g)(11) of this section, ex-
cept that A is no longer an employee of Partnership
X when B acquires the profits interest in Partnership
X, and Partnership X does not have any ongoing fi-
nancial obligations to A. Also, B acquires only a 5%
partnership interest in exchange for a cash payment
of $500,000. Partnership X does not own an inter-
est in any other life insurance policies, and the gross
value of its assets is $10 million. Although neither
Partnership X nor B has a substantial family, busi-
ness, or financial relationship with A at the time of
B’s indirect acquisition of an interest in the policy
covering A’s life, because B’s profits interest in Part-
nership X does not exceed 5%, and because no more
than 50% of Partnership X’s asset value consists of
life insurance contracts, the exception in paragraph
(c)(2)(iii)(B) of this section applies, and B’s indirect
acquisition of an interest in the policy covering A’s
life is not a reportable policy sale.
Par. 3. Section 1.101-6 is amended by
revising paragraph (b) to read as follows:
§1.101-6 Effective date.
* * * * *
(b) Notwithstanding paragraph (a)
of this section, for purposes of section
6050Y, §1.101-1(b), (c), (d), (e), (f), and
(g) apply to reportable policy sales made
after December 31, 2017, and to report-
able death benefits paid after December
31, 2017. For any other purpose, §1.101-
1(b), (c), (d), (e), (f), and (g) apply to
transfers of life insurance contracts, or
interests therein, made after the date the
Treasury decision adopting these regula-
tions as final regulations is published in
the Federal Register.
Par. 4. Section 1.6050Y-1 is added to
read as follows:
§1.6050Y-1 Information reporting for
reportable policy sales, transfers of life in-
surance contracts to foreign persons, and
reportable death benefits.
(a) Definitions. The following defini-
tions apply for purposes of this section
and §§1.6050Y-2 through 1.6050Y-4:
(1) Acquirer. The term acquirer means
any person that acquires an interest in a
life insurance contract (through a direct
acquisition or indirect acquisition of the
interest) in a reportable policy sale.
(2) Buyer. The term buyer means, with
respect to any interest in a life insurance
contract that has been transferred in a re-
portable policy sale, the person that was
the most recent acquirer of that interest in
a reportable policy sale as of the date re-
portable death benefits are paid under the
contract.
(3) Direct acquisition of an interest in
a life insurance contract. The term direct
acquisition of an interest in a life insur-
ance contract has the meaning given to it
in §1.101-1(e)(3)(i).
(4) Foreign person. The term foreign
person means a person that is not a Unit-
ed States person, as defined in section
7701(a)(30).
(5) Indirect acquisition of an interest
in a life insurance contract. The term in-
direct acquisition of an interest in a life
insurance contract has the meaning given
to it in §1.101-1(e)(3)(ii).
(6) Interest in a life insurance con-
tract. The term interest in a life insurance
contract has the meaning given to it in
§1.101-1(e)(1).
(7) Investment in the contract—(i)
Definition of investment in the contract.
With respect to the original policyhold-
er of a life insurance contract, the term
investment in the contract on any date
means that person’s investment in the con-
tract under section 72(e)(6) on that date.
With respect to any other person, the term
investment in the contract on any date
means the estimate of investment in the
contract on that date.
(ii) Definition of estimate of investment
in the contract. The term estimate of in-
vestment in the contract with respect to
any person, other than the original policy-
holder, means, on any date, the aggregate
amount of premiums paid for the contract
by that person before that date, less the ag-
gregate amount received under the contract
by that person before that date to the extent
such information is known to or can rea-
sonably be estimated by the issuer or payor.
(8) Issuer—(i) In general. Except as
provided in paragraphs (a)(8)(ii) and (iii)
of this section, the term issuer generally
means, on any date, with respect to any
interest in a life insurance contract, any
person that bears any part of the risk with
respect to the life insurance contract on
that date and any person responsible on
that date for administering the contract,
including collecting premiums and pay-
ing death benefits. For instance, if a rein-
surer reinsures on an indemnity basis all
or a portion of the risks that the original
issuer (and continuing contract adminis-
trator) might otherwise have incurred with
respect to a life insurance contract, both
the reinsurer and the original issuer of the
contract are issuers of the life insurance
contract for purposes of this paragraph (a)
(8)(i). Any designee of an issuer is also
considered an issuer for purposes of this
paragraph (a)(8)(i).

Bulletin No. 2019–17 1063 April 22, 2019
(ii) 6050Y(a) issuer. For purposes
of information reporting under section
6050Y(a) and §1.6050Y-2, the 6050Y(a)
issuer is the issuer that is responsible for
administering the life insurance contract,
including collecting premiums and paying
death benefits under the contract, on the
date of the reportable policy sale.
(iii) 6050Y(b) issuer. For purposes
of information reporting under section
6050Y(b) and §1.6050Y-3, a 6050Y(b)
issuer is:
(A) Any person that receives a RPSS
with respect to a life insurance contract
or interest therein (or, in the case of a
designee, receives notice that the issuer
for whom it serves as designee received
a RPSS), and is or was, on or before the
date of receipt of the RPSS, an issuer with
respect to the life insurance contract; or
(B) Any person that receives notice of
a transfer to a foreign person of the life
insurance contract and is or was, on the
date of transfer or on the date of receipt of
the notice, an issuer with respect to the life
insurance contract, unless:
(1) That person (or, in the case of a
designee, the issuer for whom it serves as
designee) is not responsible for adminis-
tering the life insurance contract, includ-
ing collecting premiums and paying death
benefits under the contract, on the date the
notice of a transfer to a foreign person of
a life insurance contract is received; and
(2) That person, or its designee, pro-
vides the issuer that is responsible on that
date for administering the life insurance
contract, including collecting premiums
and paying death benefits under the con-
tract, with such notice and with any avail-
able information necessary to accomplish
reporting under section 6050Y(b) and
§1.6050Y-3.
(iv) Designee. A person is treated as
the designee of an issuer for purposes of
this paragraph (a)(8) only if so designated
in writing, including electronically. The
designation must be signed and acknowl-
edged, in writing or electronically, by the
person named as designee, or that person’s
representative, and by the issuer making
the designation, or its representative.
(9) Life insurance contract. The term
life insurance contract has the meaning
given to it in section 7702(a). A life insur-
ance contract may also be referred to as a
life insurance policy.
(10) Notice of a transfer to a foreign
person. The term notice of a transfer to
a foreign person means any notice of a
transfer of title to, possession of, or le-
gal ownership of a life insurance contract
received by a 6050Y(b) issuer, including
information provided for nontax pur-
poses such as a change of address no-
tice for purposes of sending statements
or for other purposes, and information
relating to loans, premiums, or death
benefits with respect to the contract un-
less the 6050Y(b) issuer knows that no
transfer of the life insurance contract has
occurred or knows that the transferee
is a United States person. For this pur-
pose, a 6050Y(b) issuer may rely on a
Form W-9, Request for Taxpayer Iden-
tification Number and Certification, or
a valid substitute form, that meets the
requirements of §1.1441-1(d)(2) (substi-
tuting “6050Y(b) issuer” for “withhold-
ing agent”), that indicates the transferee
is a United States person. For instance,
a change of address notice that changes
the address to a foreign address or oth-
er updates to the information relating to
the payment of premiums that includes
foreign banking or other foreign finan-
cial institution information is notice of
a transfer to a foreign person unless the
6050Y(b) issuer knows that no transfer
has occurred or the transferee is a United
States person.
(11) Payor. The term payor means any
person making a payment of reportable
death benefits.
(12) Reportable death benefits. The
term reportable death benefits means
amounts paid by reason of the death of the
insured under a life insurance contract that
are attributable to an interest in the life in-
surance contract that was transferred in a
reportable policy sale.
(13) Reportable death benefits payment
recipient. The term reportable death ben-
efits payment recipient means any person
that receives reportable death benefits as a
beneficiary under a life insurance contract
or as the holder of an interest in a life in-
surance contract.
(14) Reportable policy sale. The term
reportable policy sale has the meaning
given to it in §1.101-1(c).
(15) Reportable policy sale payment.
The term reportable policy sale payment
generally means the total amount of cash
and the fair market value of any other con-
sideration transferred, or to be transferred,
in a reportable policy sale, including any
amount of a reportable policy sale pay-
ment recipient’s debt assumed by the ac-
quirer in a reportable policy sale. In the
case of an indirect acquisition of an inter-
est in a life insurance contract that is a re-
portable policy sale, the reportable policy
sale payment is the amount of cash and
the fair market value of any other consid-
eration transferred for the ownership in-
terest in the entity, including the amount
of any debt assumed by the acquirer, that
is appropriately allocable to the interest
in the life insurance contract held by the
entity.
(16) Reportable policy sale payment
recipient. The term reportable policy sale
payment recipient means any person that
receives a reportable policy sale payment
in a reportable policy sale. A broker or
other intermediary that retains a portion of
the cash or other consideration transferred
in a reportable policy sale is also a report-
able policy sale payment recipient.
(17) Reportable policy sale statement.
The term reportable policy sale state-
ment (RPSS) means a statement furnished
by an acquirer to an issuer under section
6050Y(a)(2) and §1.6050Y-2(d)(2)(i).
(18) Seller. The term seller means any
person that—
(i) Holds an interest in a life insurance
contract and transfers that interest, or any
part of that interest, to an acquirer in a re-
portable policy sale; or
(ii) Owns a life insurance contract and
transfers title to, possession of, or legal
ownership of that life insurance contract
to a foreign person.
(19) Transfer of an interest in a life in-
surance contract. The term transfer of an
interest in a life insurance contract has the
meaning given to it in §1.101-1(e)(2).
(20) United States person. The term
United States person has the meaning giv-
en to it in section 7701(a)(30).
(b) Applicability date. This section and
§§1.6050Y-2 through 1.6050Y-3 apply to
reportable policy sales made after Decem-
ber 31, 2017. This section and §1.6050Y-
4 apply to reportable death benefits paid
after December 31, 2017. However, for
reportable policy sales and payments of
reportable death benefits occurring after
December 31, 2017, and before the date

April 22, 2019 1064 Bulletin No. 2019–17
final regulations are published in the Fed-
eral Register, transition relief will be pro-
vided as follows:
(1) For reportable policy sales occur-
ring after December 31, 2017, and before
the date final regulations are published in
the Federal Register, statements required
to be furnished to issuers under section
6050Y(a)(2) and §1.6050Y-2 must be
furnished by the later of the applicable
deadline set forth in final regulations or
60 days after the date final regulations are
published in the Federal Register.
(2) For reportable policy sales occur-
ring after December 31, 2017, and before
the date final regulations are published in
the Federal Register, returns required to
be filed under section 6050Y(a)(1) and
(b)(1), §1.6050Y-2, and §1.6050Y-3 and
statements required to be furnished to
payment recipients and sellers under sec-
tion 6050Y(a)(2) and (b)(2), §1.6050Y-2,
and §1.6050Y-3 must be filed or furnished
by the later of the applicable deadline set
forth in final regulations or 90 days after
the date final regulations are published in
the Federal Register.
(3) For payments of reportable death
benefits paid after December 31, 2017,
and before the date final regulations are
published in the Federal Register, re-
turns required to be filed under section
6050Y(c)(1) and §1.6050Y-4 and state-
ments required to be furnished to payment
recipients under section 6050Y(c)(2) and
§1.6050Y-4 must be filed or furnished
by the later of the applicable deadline set
forth in final regulations or 90 days after
the date final regulations are published in
the Federal Register.
Par. 5. Section 1.6050Y-2 is added to
read as follows:
§1.6050Y-2 Information reporting by
acquirers for reportable policy sale
payments.
(a) Requirement of reporting. Except
as provided in paragraph (f) of this sec-
tion, every person that is an acquirer in a
reportable policy sale during any calen-
dar year must file a separate information
return with the Internal Revenue Service
(IRS) in the form and manner as required
by the IRS for each reportable policy sale
payment recipient, including any seller
that is a reportable policy sale payment
recipient. Each return must include the
following information with respect to the
seller or other reportable policy sale pay-
ment recipient to which the return relates:
(1) The name, address, and taxpayer
identification number (TIN) of the acquir-
er;
(2) The name, address, and TIN of the
seller or other reportable policy sale pay-
ment recipient to which the return relates;
(3) The date of the reportable policy
sale;
(4) The name of the 6050Y(a) issuer
of the life insurance contract acquired and
the policy number of the life insurance
contract;
(5) The aggregate amount of reportable
policy sale payments made, or to be made,
to the seller or other reportable policy sale
payment recipient to which the return re-
lates with respect to the reportable policy
sale; and
(6) Any other information that is re-
quired by the form or its instructions.
(b) Unified reporting. The information
reporting requirement of paragraph (a) of
this section applies to each acquirer in a
series of prearranged transfers of an inter-
est in a life insurance contract. In a series
of prearranged transfers, an acquirer’s
reporting obligation is deemed satisfied
if the information required by paragraph
(a) of this section with respect to that ac-
quirer is timely reported on behalf of that
acquirer in a manner that is consistent
with forms, instructions, and other IRS
guidance by one or more other acquirers
or by a third party information reporting
contractor.
(c) Time and place for filing. Returns
required to be made under paragraph (a)
of this section must be filed with the In-
ternal Revenue Service Center designated
on the prescribed form or in its instruc-
tions on or before February 28 (March 31
if filed electronically) of the year follow-
ing the calendar year in which the report-
able policy sale occurred. However, see
§1.6050Y-1(b)(2) for transition rules.
(d) Requirement of and time for fur-
nishing statements—(1) Statements to re-
portable policy sale payment recipients—
(i) Requirement of furnishing statement.
Every person required to file an infor-
mation return under paragraph (a) of this
section with respect to a reportable policy
sale payment recipient must furnish in the
form and manner prescribed by the IRS to
the reportable policy sale payment recipi-
ent whose name is set forth in that return a
written statement showing the information
required by paragraph (a) of this section
with respect to the reportable policy sale
payment recipient and the name, address,
and phone number of the information con-
tact of the person furnishing the written
statement. The contact information of the
person furnishing the written statement
must provide direct access to a person that
can answer questions about the statement.
The statement is not required to include
information with respect to any other re-
portable policy sale payment recipient in
the reportable policy sale or information
about reportable policy sale payments to
any other reportable policy sale payment
recipient.
(ii) Time for furnishing statement. Each
statement required by paragraph (d)(1)
(i) of this section to be furnished to any
reportable policy sale payment recipient
must be furnished on or before February
15 of the year following the calendar year
in which the reportable policy sale oc-
curred. However, see §1.6050Y-1(b)(2)
for transition rules.
(2) Statements to 6050Y(a) issuers—
(i) Requirement of furnishing RPSS—(A)
In general. Except as provided in para-
graph (d)(2)(i)(B) of this section, every
person required to file a return under
paragraph (a) of this section must furnish
in the form and manner prescribed by the
IRS to the 6050Y(a) issuer whose name
is required to be set forth in the return
a RPSS with respect to each reportable
policy sale payment recipient that is also
a seller. Each RPSS must show the infor-
mation required by paragraph (a) of this
section with respect to the seller named
therein, except that the RPSS is not re-
quired to set forth the amount of any re-
portable policy sale payment. Each RPSS
must also show the name, address, and
phone number of the information contact
of the person furnishing the RPSS. This
contact information must provide direct
access to a person that can answer ques-
tions about the RPSS.
(B) Exception from reporting. A RPSS
is not required to be furnished to the
6050Y(a) issuer by an acquirer acquiring
an interest in a life insurance contract in
an indirect acquisition.

Bulletin No. 2019–17 1065 April 22, 2019
(ii) Time for furnishing RPSS. Except
as otherwise provided in this paragraph (d)
(2)(ii), each RPSS required by paragraph
(d)(2)(i) of this section to be furnished to a
6050Y(a) issuer must be furnished by the
later of 20 calendar days after the report-
able policy sale, or 5 calendar days after
the end of the applicable state law rescis-
sion period. However, if the later date is
after January 15 of the year following the
calendar year in which the reportable pol-
icy sale occurred, the RPSS must be fur-
nished by January 15 of the year following
the calendar year in which the reportable
policy sale occurred. See §1.6050Y-1(b)
(1) for transition rules.
(3) Unified reporting. The information
reporting requirements of paragraphs (d)
(1)(i) and (d)(2)(i) of this section apply to
each acquirer in a series of prearranged
transfers of an interest in a life insurance
contract, as described in paragraph (b)
of this section. In a series of prearranged
transfers of an interest in a life insurance
contract, an acquirer’s obligation to fur-
nish statements is deemed satisfied if the
information required by paragraphs (d)(1)
(i) and (d)(2)(i) of this section with respect
to that acquirer is timely reported on be-
half of that acquirer consistent with forms,
instructions, and other IRS guidance by
one or more other acquirers or by a third
party information reporting contractor.
(e) Notice of rescission of a reportable
policy sale. Any person that has filed a
return required by section 6050Y(a)(1)
and this section with respect to a report-
able policy sale must file a corrected re-
turn within 15 calendar days of the receipt
of notice of the rescission of the report-
able policy sale. Any person that has fur-
nished a written statement under section
6050Y(a)(2) and this section with respect
to the reportable policy sale must furnish
the recipient of that statement with a cor-
rected statement within 15 calendar days
of the receipt of notice of the rescission of
the reportable policy sale.
(f) Exceptions to requirement to file. An
acquirer that is a foreign person is not re-
quired to file an information return under
paragraph (a) of this section with respect
to a reportable policy sale unless—
(1) The life insurance contract (or in-
terest therein) transferred in the sale is
on the life of an insured who is a United
States person at the time of the sale; or
(2) The sale is subject to the laws of
one or more States of the United States
that pertain to acquisitions or sales of life
insurance contracts (or interests therein).
(g) Cross-reference to penalty provi-
sions—(1) Failure to file correct informa-
tion return. For provisions relating to the
penalty provided for failure to file timely
a correct information return required un-
der section 6050Y(a)(1) and this section,
see section 6721 and §301.6721-1 of this
chapter. See §301.6724-1 of this chapter
for the waiver of a penalty if the failure is
due to reasonable cause and is not due to
willful neglect.
(2) Failure to furnish correct state-
ment. For provisions relating to the penal-
ty provided for failure to furnish a correct
statement to identified persons under sec-
tion 6050Y(a)(2) and this section, see sec-
tion 6722 and §301.6722-2 of this chapter.
See §301.6724-1 of this chapter for the
waiver of a penalty if the failure is due to
reasonable cause and is not due to willful
neglect.
Par. 6. Section 1.6050Y-3 is added to read
as follows:
§1.6050Y-3 Information reporting by
6050Y(b) issuers for reportable policy
sales and transfers of life insurance
contracts to foreign persons.
(a) Requirement of reporting. Except
as provided in paragraph (f) of this sec-
tion, each 6050Y(b) issuer, that receives
a RPSS or any notice of a transfer to a
foreign person must file an information
return with the Internal Revenue Service
(IRS) with respect to each seller in the
form and manner prescribed by the IRS.
The return must include the following in-
formation with respect to the seller:
(1) The name, address, and taxpayer
identification number (TIN) of the seller;
(2) The investment in the contract with
respect to the seller;
(3) The amount the seller would have
received if the seller had surrendered the
life insurance contract on the date of the
reportable policy sale or the transfer of
the contract to a foreign person, or if the
date of the transfer to a foreign person is
not known to the 6050Y(b) issuer, the date
the 6050Y(b) issuer received notice of the
transfer; and
(4) Any other information that is re-
quired by the form or its instructions.
(b) Unified reporting. Each 6050Y(b)
issuer subject to the information report-
ing requirement of paragraph (a) of this
section must satisfy that requirement, but
a 6050Y(b) issuer’s reporting obligation
is deemed satisfied if the information re-
quired by paragraph (a) of this section with
respect to that 6050Y(b) issuer is timely
reported on behalf of that 6050Y(b) issuer
in a manner that is consistent with forms,
instructions, and other IRS guidance by
one or more other 6050Y(b) issuers or by
a third party information reporting con-
tractor.
(c) Time and place for filing. Except
as otherwise provided in this paragraph
(c), returns required to be made under
paragraph (a) of this section must be
filed with the Internal Revenue Service
Center designated on the prescribed
form or in its instructions on or before
February 28 (March 31 if filed electroni-
cally) of the year following the calendar
year in which the reportable policy sale
or the transfer of the contract to a foreign
person occurred. If the 6050Y(b) issuer
does not receive notice of a transfer to a
foreign person until after January 31 of
the calendar year following the year in
which the transfer occurred, returns re-
quired to be made under paragraph (a) of
this section must be filed by the later of
February 28 (March 31 if filed electron-
ically) of the calendar year following
the year in which the transfer occurred
or thirty days after the date notice is re-
ceived. See §1.6050Y-1(b)(2) for transi-
tion rules.
(d) Requirement of and time for fur-
nishing statements—(1) Requirement of
furnishing statement. Every 6050Y(b) is-
suer filing a return required by paragraph
(a) of this section must furnish to each
seller that is a reportable policy sale pay-
ment recipient or makes a transfer to a for-
eign person and whose name is required
to be set forth in the return a written state-
ment showing the information required by
paragraph (a) of this section with respect
to that seller and the name, address, and
phone number of the information contact
of the person filing the return. This contact
information must provide direct access to
a person that can answer questions about
the statement.

April 22, 2019 1066 Bulletin No. 2019–17
(2) Time for furnishing statement. Ex-
cept as otherwise provided in this para-
graph (d)(2), each statement required
by paragraph (d)(1) of this section to be
furnished to any seller must be furnished
on or before February 15 of the year fol-
lowing the calendar year in which the re-
portable policy sale or transfer to a foreign
person occurred. If a 6050Y(b) issuer does
not receive notice of a transfer to a foreign
person until after January 31 of the calen-
dar year following the year in which the
transfer occurred, each statement required
to be made under paragraph (d) of this
section must be furnished by the date thir-
ty days after the date notice is received.
See §1.6050Y-1(b)(2) for transition rules.
(3) Unified reporting. Each 6050Y(b)
issuer subject to the information reporting
requirement of paragraph (d)(1) of this
section must satisfy that requirement, but
a 6050Y(b) issuer’s reporting obligation
is deemed satisfied if the information re-
quired by paragraph (d)(1) of this section
with respect to that 6050Y(b) issuer is
timely reported on behalf of that 6050Y(b)
issuer consistent with forms, instructions,
and other IRS guidance by one or more
other 6050Y(b) issuers or by a third party
information reporting contractor.
(e) Notice of rescission of a reportable
policy sale or transfer of an insurance con-
tract to a foreign person. Any 6050Y(b)
issuer that has filed a return required by
section 6050Y(b)(1) and this section with
respect to a reportable policy sale or trans-
fer of an insurance contract to a foreign
person must file a corrected return within
15 calendar days of the receipt of notice of
the rescission of the reportable policy sale
or transfer of the insurance contract to a
foreign person. Any 6050Y(b) issuer that
has furnished a written statement under
section 6050Y(b)(2) and this section with
respect to the reportable policy sale or
transfer of the insurance contract to a for-
eign person must furnish the recipient of
that statement with a corrected statement
within 15 calendar days of the receipt of
notice of the rescission of the reportable
policy sale or transfer of the insurance
contract to a foreign person.
(f) Exceptions to requirement to file. A
6050Y(b) issuer is not required to file an
information return under paragraph (a) of
this section when either paragraph (f)(1)
or (2) of this section applies.
(1) Except as otherwise provided in
this paragraph (f)(1), the 6050Y(b) issuer
obtains documentation upon which it may
rely to treat a seller of the contract as a
foreign beneficial owner in accordance
with §1.1441-1(e)(1)(ii), applying in such
case the provisions of §1.1441-1 by sub-
stituting the term “6050Y(b) issuer” for
the term “withholding agent” and without
regard to the fact that these provisions ap-
ply only to amounts subject to withhold-
ing under chapter 3 of subtitle A of the In-
ternal Revenue Code. A 6050Y(b) issuer
may also obtain from a seller that is a part-
nership or trust, in addition to documenta-
tion establishing the entity’s foreign sta-
tus, a written certification from the entity
that no beneficial owner of any portion of
the proceeds of the sale is a United States
person. In such a case, the issuer may rely
upon the written certification to treat the
partnership or trust as a foreign beneficial
owner for purposes of this paragraph (f)
(1) provided that the seller does not have
actual knowledge that a United States
person is the beneficial owner of all or a
portion of the proceeds of the sale. See
§1.1441-1(c)(6)(ii) for the definition of
beneficial owner that applies for purposes
of this paragraph (f)(1). Additionally, for
certifying its status as a foreign beneficial
owner (as applicable) for purposes of this
paragraph (f)(1), a seller that is required to
report any of the income from the sale as
effectively connected with the conduct of
a trade or business in the United States un-
der section 864(b) is required to provide
to the 6050Y(b) issuer a Form W-8ECI,
Certificate of Foreign Person’s Claim that
Income is Effectively Connected with the
Conduct of a Trade or Business in the
United States. If a 6050Y(b) issuer ob-
tains a Form W-8ECI from a seller with
respect to the sale or has reason to know
that income from the sale is effectively
connected with the conduct of a trade or
business in the United States under sec-
tion 864(b), the exception to reporting de-
scribed in this paragraph (f)(1) does not
apply.
(2) The 6050Y(b) issuer receives no-
tice of a transfer to a foreign person, but
does not receive a RPSS with respect to
the transfer, provided that, at the time the
notice is received—
(i) The 6050Y(b) issuer is not a United
States person;
(ii) The life insurance contract (or in-
terest therein) transferred is not on the life
of a United States person; and
(iii) The 6050Y(b) issuer has not clas-
sified the seller as a United States person
in its books and records.
(g) Cross-reference to penalty provi-
sions—(1) Failure to file correct informa-
tion return. For provisions relating to the
penalty provided for failure to file timely a
correct information return required under
section 6050Y(b)(1) and this section, see
section 6721 and §301.6721-1 of this chap-
ter. See §301.6724-1 of this chapter for the
waiver of a penalty if the failure is due to
reasonable cause and is not due to willful
neglect.
(2) Failure to furnish correct statement.
For provisions relating to the penalty pro-
vided for failure to furnish a correct state-
ment to identified persons under section
6050Y(b)(2) and this section, see section
6722 and §301.6722-2 of this chapter. See
§301.6724-1 of this chapter for the waiver
of a penalty if the failure is due to reason-
able cause and is not due to willful neglect.
Par. 7. Section 1.6050Y-4 is added to read
as follows:
§1.6050Y-4 Information reporting by
payors for reportable death benefits.
(a) Requirement of reporting. Except as
provided in paragraph (e) of this section,
every person that is a payor of reportable
death benefits during any calendar year
must file a separate information return for
such calendar year with the Internal Rev-
enue Service (IRS) for each reportable
death benefits payment recipient in the
form and manner prescribed by the IRS.
The return must include the following in-
formation with respect to the reportable
death benefits payment recipient to which
the return relates:
(1) The name, address, and taxpayer
identification number (TIN) of the payor;
(2) The name, address, and TIN of the
reportable death benefits payment recipi-
ent;
(3) The date of the payment;
(4) The gross amount of payments
made to the reportable death benefits pay-
ment recipient during the taxable year;
(5) The payor’s estimate of the invest-
ment in the contract with respect to the

Bulletin No. 2019–17 1067 April 22, 2019
buyer, limited to the payor’s estimate of
the buyer’s investment in the contract with
respect to the interest for which the report-
able death benefits payment recipient was
paid; and
(6) Any other information that is re-
quired by the form or its instructions.
(b) Time and place for filing. Except
as otherwise provided in §1.6050Y-1(b)
(3), returns required to be made under
this section must be filed with the Internal
Revenue Service Center designated in the
instructions for the form on or before Feb-
ruary 28 (March 31 if filed electronically)
of the year following the calendar year in
which the payment of reportable death
benefits was made.
(c) Requirement of and time for fur-
nishing statements—(1) Requirement of
furnishing statement. Every person re-
quired to file an information return under
paragraph (a) of this section must furnish
to each reportable death benefits payment
recipient whose name is required to be
set forth in that return a written statement
showing the information required by para-
graph (a) of this section with respect to
that reportable death benefits payment re-
cipient and the name, address, and phone
number of the information contact of the
payor. This contact information must pro-
vide direct access to a person that can an-
swer questions about the statement.
(2) Time for furnishing statement.
Each statement required by paragraph (c)
(1) of this section to be furnished to any
reportable death benefits payment recipi-
ent must be furnished on or before Janu-
ary 31 of the year following the calendar
year in which the payment of reportable
death benefits was made. However, see
§1.6050Y-1(b)(3) for transition rules.
(d) Notice of rescission of a reportable
policy sale. Any person that has filed a
return required by section 6050Y(c) and
this section with respect to a payment of
reportable death benefits must file a cor-
rected return within 15 calendar days of
the receipt of notice of the rescission of
the buyer’s reportable policy sale. Any
person that has furnished a written state-
ment under section 6050Y(c)(2) and this
section with respect to a payment of re-
portable death benefits must furnish the
recipient of that statement with a correct-
ed statement within 15 calendar days of
the receipt of notice of the rescission of
the buyer’s reportable policy sale.
(e) Exceptions to requirement to file. A
payor is not required to file an information
return under paragraph (a) of this section
with respect to a payment of reportable
death benefits when either paragraph (e)
(1) or (2) of this section applies.
(1) Except as otherwise provided in this
paragraph (e)(1), the payor obtains docu-
mentation in accordance with §1.1441-
1(e)(1)(ii) upon which it may rely to treat
the reportable death benefits payment re-
cipient as a foreign beneficial owner of
the reportable death benefits, applying in
such case the provisions of §1.1441-1 by
substituting the term “payor” for the term
“withholding agent” and without regard
to the fact that the provisions apply only
to amounts subject to withholding un-
der chapter 3 of subtitle A of the Internal
Revenue Code. A payor may also obtain
from a partnership or trust that is a report-
able death benefits recipient, in addition
to documentation establishing the enti-
ty’s foreign status, a written certification
from the entity that no beneficial owner of
any portion of the reportable death bene-
fits payment is a United States person. In
such a case, a payor may rely upon the
written certification to treat the partner-
ship or trust as a foreign beneficial owner
for purposes of this paragraph (e)(1) pro-
vided that the payor does not have actual
knowledge that a United States person is
the beneficial owner of all or a portion of
the reportable death benefits payment. See
§1.1441-1(c)(6)(ii) for the definition of
beneficial owner that applies for purposes
of this paragraph (e)(1). Additionally, for
certifying its status as a foreign beneficial
owner (as applicable) for purposes of this
paragraph (e)(1), a reportable death ben-
efits payment recipient that is required to
report any of the income from the sale as
effectively connected with the conduct of
a trade or business in the United States un-
der section 864(b) is required to provide to
the payor a Form W-8ECI, Certificate of
Foreign Person’s Claim that Income is Ef-
fectively Connected with the Conduct of a
Trade or Business in the United States. If
a payor obtains a Form W-8ECI from a re-
portable death benefits payment recipient
with respect to the payment of reportable
death benefits or has reason to know that
the payment is effectively connected with
the conduct of a trade or business of the
recipient in the United States under sec-
tion 864(b), the exception to reporting de-
scribed in this paragraph (e)(1) does not
apply.
(2) The buyer obtained the life insur-
ance contract (or interest therein) un-
der which reportable death benefits are
paid in a reportable policy sale to which
the exception to reporting described in
§1.6050Y-3(f)(2) applies.
(f) Cross-reference to penalty provi-
sions—(1) Failure to file correct informa-
tion return. For provisions relating to the
penalty provided for failure to file timely
a correct information return required un-
der section 6050Y(c)(1) and this section,
see section 6721 and §301.6721-1 of this
chapter. See §301.6724-1 of this chapter
for the waiver of a penalty if the failure is
due to reasonable cause and is not due to
willful neglect.
(2) Failure to furnish correct statement.
For provisions relating to the penalty pro-
vided for failure to furnish a correct state-
ment to identified persons under section
6050Y(c)(2) and this section, see section
6722 and §301.6722-2 of this chapter. See
§301.6724-1 of this chapter for the waiver
of a penalty if the failure is due to reason-
able cause and is not due to willful neglect.
Kirsten Wielobob,
Deputy Commissioner for Services
and Enforcement.
(Filed by the Office of the Federal Register on March
22, 2019, 8:45 a.m., and published in the issue of the
Federal Register for March 25, 2019, 84 F.R. 11009)

Partial Withdrawal of
Notice of Proposed
Rulemaking and Notice of
Proposed Rulemaking
Certain Transfers of
Property to Real Estate
Investment Trusts [REITs]
REG-113943-17
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Partial withdrawal of notice of
proposed rulemaking and notice of pro-
posed rulemaking.

April 22, 2019 1068 Bulletin No. 2019–17
SUMMARY: This document withdraws a
portion of a notice of proposed rulemaking
published in the Proposed Rules section of
the Federal Register on June 8, 2016. If ad-
opted, the proposed rules would have pro-
vided guidance for transactions in which
property of a C corporation becomes the
property of a REIT following certain cor-
porate distributions of controlled corpora-
tion stock. This document also contains a
notice of proposed rulemaking that pro-
vides revised guidance on the same sub-
ject. These proposed regulations would
affect REITs, C corporations the property
of which becomes property of a REIT, and
their respective shareholders.
DATES: Comments and requests for a
public hearing must be received by May
10, 2019.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG-113943-17), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m. to
CC:PA:LPD:PR (REG-113943-17), Cou-
rier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, N.W., Wash-
ington, DC 20224 or sent electronically
via the Federal eRulemaking Portal at
http://www.regulations.gov/ (IRS REG-
113943-17).
FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regu-
lations, Austin Diamond-Jones, (202)
317-5363; concerning the submission of
comments or to request a public hearing,
Regina Johnson, (202) 317-6901 (not toll-
free numbers).
SUPPLEMENTARY INFORMATION
Background
This document contains proposed
amendments to 26 CFR part 1 under sec-
tion 337(d) of the Internal Revenue Code
(Code).
On June 8, 2016, the Department of
the Treasury (Treasury Department) and
the IRS published temporary regulations
(TD 9770) under section 337(d) (Tempo-
rary Regulations) in the Federal Register
(81 FR 36793) concerning certain trans-
fers of property to regulated investment
companies (RICs) and real estate invest-
ment trusts (REITs). A notice of proposed
rulemaking (REG-126452-15) was pub-
lished in the Federal Register (81 FR
36816) on the same day (2016 Proposed
Regulations). The text of the Temporary
Regulations served as the text for part of
the 2016 Proposed Regulations, which
also included an amendment not ad-
dressed in the Temporary Regulations. A
correction to the Temporary Regulations
was published in the Federal Register
(81 FR 41800) on June 28, 2016.
The Treasury Department and the IRS
received one written comment and a letter
addressed to the Secretary of the Treasury
(Secretary) by the Chairmen and Ranking
Members of the Ways and Means Com-
mittee of the U.S. House of Representa-
tives and the Finance Committee of the
U.S. Senate in response to the 2016 Pro-
posed Regulations. The comment request-
ed a public hearing, and a hearing was
held on November 9, 2016.
After consideration of the letter, the
written comment, and the comments made
at the public hearing, the Treasury Depart-
ment and the IRS adopted the 2016 Pro-
posed Regulations, in part, in final regula-
tions (TD 9810) published in the Federal
Register (82 FR 5387) on January 18,
2017 (Final Regulations). The Final Reg-
ulations adopted a definition of the term
“recognition period” that is consistent
with that used in section 1374(d) relating
to S corporations. The Final Regulations
amended and removed the corresponding
provisions in the Temporary Regulations
and indicated that the Treasury Depart-
ment and the IRS would continue to study
other issues addressed in the Temporary
Regulations and the 2016 Proposed Reg-
ulations.
Executive Order 13789 (E.O. 13789),
issued on April 21, 2017, instructed the
Secretary to review all significant tax
regulations issued on or after January 1,
2016, and to take concrete action to al-
leviate the burdens of regulations that
(i) impose an undue financial burden on
U.S. taxpayers; (ii) add undue complexity
to the federal tax laws; or (iii) exceed the
statutory authority of the IRS. E.O. 13789
further instructed the Secretary to submit
to the President within 60 days an interim
report identifying regulations that meet
these criteria.
Notice 2017-38 (2017-30 I.R.B. 147
(July 24, 2017)) included the Temporary
Regulations in a list of eight regulations
identified by the Secretary in the interim re-
port as meeting at least one of the first two
criteria specified in E.O. 13789. In partic-
ular, Notice 2017-38 mentioned a concern
raised by commenters that the Temporary
Regulations “could result in over-inclu-
sion of gain in some cases, particularly
where a large corporation acquires a small
corporation that engaged in a Section 355
spinoff and the large corporation subse-
quently makes a REIT election.” See also
Executive Order 13789—Second Report
to the President on Identifying and Re-
ducing Tax Regulatory Burdens (Second
Report), 82 FR 48013 (October 16, 2017)
(stating that the Treasury Department and
the IRS “agree that the temporary regula-
tions may produce inappropriate results
in some cases”). The Treasury Depart-
ment and the IRS received three written
comments in response to Notice 2017-38
and the Second Report that addressed the
Temporary Regulations and the 2016 Pro-
posed Regulations.
Explanation of Provisions
I. Gain Recognized by Successor Corpo-
rations
Pursuant to §1.337(d)-7(c)(6) of the
2016 Proposed Regulations, if a C corpo-
ration is the distributing corporation or the
controlled corporation in a “related sec-
tion 355 distribution” (within the meaning
of proposed §1.337(d)-7(f)(1)(i)), and the
C corporation or its successor (within the
meaning of proposed §1.337(d)-7(f)(2))
engages in a conversion transaction (as
defined in §1.337(d)-7(a)(2)(ii)) involving
a REIT, the C corporation or its successor
will be treated as making a deemed sale
election (within the meaning of proposed
§1.337(d)-7(c)). Commenters suggested
that application of proposed §1.337(d)-
7(c)(6) to successors (within the meaning
of proposed §1.337(d)-7(f)(2)) could re-
sult in recognition of gain greatly in ex-
cess of the amount that would have been
recognized if the distributing corporation
or the controlled corporation had directly
engaged in a conversion transaction.

Bulletin No. 2019–17 1069 April 22, 2019
To illustrate the issue, consider the fol-
lowing example (Example One): Each of
Distributing and Acquiring is a C corpora-
tion, and each holds real estate assets with
$1 billion fair market value and $0 adjust-
ed basis. Distributing and Acquiring are
unrelated. Distributing owns 100 percent
of the stock of Controlled, which holds
assets with $20 million fair market value
and $0 adjusted basis. In Year 1, Distrib-
uting distributes the stock of Controlled
in a section 355 distribution (as defined
in proposed §1.337(d)-7(a)(2)(vi)). In
Year 3, Acquiring acquires Controlled in a
transaction in which Acquiring becomes a
successor of Controlled (within the mean-
ing of proposed §1.337(d)-7(f)(2)). At that
time, Acquiring has no plan to convert to a
REIT. No asset held by Distributing, Con-
trolled, or Acquiring appreciates or depre-
ciates in value between Year 1 and Year 9.
In Year 9, Acquiring merges into a REIT
and does not make a deemed sale election
under §1.337(d)-7(c)(5).
As a successor to Controlled, Acquir-
ing itself was ineligible to make a REIT
election until Year 11. Section 856(c)(8).
However, the merger of Acquiring into a
REIT is not addressed by section 856(c)
(8). On the other hand, if Acquiring were
not a successor to a distributing corpora-
tion or a controlled corporation, its assets
would be subject to section 1374 treat-
ment upon the merger (unless Acquiring
actually made a deemed sale election).
Because Acquiring is a successor to a
controlled corporation and engages in a
conversion transaction within ten years of
a related section 355 distribution, the 2016
Proposed Regulations would treat Acquir-
ing as making a deemed sale election and
require Acquiring to recognize $1.02 bil-
lion gain ($1.02 billion fair market value
less $0 adjusted bases of all its property at
the time of the merger). This gain would
greatly exceed the $20 million gain ($20
million fair market value less $0 adjusted
basis) Controlled would have recognized
if Acquiring had been a REIT when it ac-
quired Controlled’s converted property.
The Treasury Department and the IRS
agree with the commenters that this result
is inappropriate.
To address the concern described in
the previous paragraph, the Treasury De-
partment and the IRS propose adopting a
new limitation to the general rule in newly
proposed §1.337(d)-7(c)(6)(i) (the general
rule) (which is the same as the general rule
in the 2016 Proposed Regulations). As a
result of the limitation, gain immediately
recognized by a C corporation engaging
in a section 355 distribution and a later
conversion transaction will be limited to
gain on property traceable to the section
355 distribution.
The limitation is based on a comment
received and would be available to a dis-
tributing corporation or a controlled cor-
poration (and a successor) that engages in
a conversion transaction within the ten-
year period following a related section
355 distribution. The limitation would
provide that, if a C corporation is treated
as making a deemed sale election but has
not actually made such an election, the
C corporation would be treated as making
the election only with respect to its distri-
bution property. “Distribution property”
would be defined as property owned by
a distributing corporation or a controlled
corporation or a member of the separate
affiliated group of the distributing corpo-
ration or the controlled corporation (SAG
member) immediately after a section 355
distribution, and other property the basis
of which is determined, directly or indi-
rectly, in whole or in part, by reference to
that property. However, no formulation of
the step transaction doctrine will be used
to determine whether property acquired
after the distribution is distribution prop-
erty. The C corporation’s property that is
not distribution property would be subject
to section 1374 treatment under §1.337(d)-
7(b) instead of deemed sale treatment un-
der §1.337(d)-7(c)(6). In general, the C
corporation must establish that any partic-
ular property is not distribution property.
However, property with built-in loss as of
the date of the conversion transaction will
be presumed to not be distribution prop-
erty unless the C corporation establishes
that it owned such property immediately
after the related section 355 distribution.
To illustrate the limitation, consider
the following example (Example Two):
Distributing is a C corporation that owns
100 percent of the stock of Controlled. In
Year 1, Distributing distributes the stock
of Controlled in a section 355 distribution.
At the time of the section 355 distribution,
Controlled has one asset (Asset 1) with $5
million fair market value and $0 adjusted
basis. In Year 2, Controlled purchases a
second asset (Asset 2), which has $1 mil-
lion fair market value and $1 million ad-
justed basis. In Year 5, Controlled engages
in a conversion transaction when it merges
into a REIT in a transaction described in
section 368(a)(1). At the time of the merg-
er, Asset 1 has $5.5 million fair market
value, and Asset 2 has $1.1 million fair
market value. The adjusted bases of Asset
1 and Asset 2 are both unchanged.
If the limitation is available and Con-
trolled does not make a deemed sale
election, Controlled would be treated
as making a deemed sale election only
with respect to Asset 1 (and not Asset 2)
because Asset 1 was held by Controlled
immediately after the related section 355
distribution and is therefore distribution
property. Because Controlled can estab-
lish that it did not own Asset 2 immediate-
ly after the related section 355 distribution
(and the basis of Asset 2 was not deter-
mined, directly or indirectly, in whole or
in part, by reference to the basis of an asset
held by Controlled immediately after the
related section 355 distribution in Year 1),
Asset 2 is not distribution property, and
Controlled will not be treated as electing
deemed sale treatment with respect to As-
set 2. Accordingly, Controlled would rec-
ognize $5.5 million gain on Asset 1 ($5.5
million fair market value less $0 adjusted
basis), and the REIT would be subject to
section 1374 treatment with respect to As-
set 2 and its $0.1 million built-in gain.
However, if Controlled had elected
deemed sale treatment or was unable to
establish that Asset 2 was not distribution
property, then all of its assets that became
converted property, rather than only the
distribution property, would be treated as
sold upon Controlled’s merger into a REIT
in Year 5. Controlled would recognize $5.6
million gain ($5.5 million gain on Asset 1
($5.5 million fair market value less $0 ad-
justed basis at the time of the merger) and
$0.1 million gain on Asset 2 ($1.1 million
fair market value less $1 million adjusted
basis at the time of the merger)). Neither
Asset 1 nor Asset 2 would be subject to
section 1374 treatment.
As a result of the combination of the
general rule and the limitation, a C corpo-
ration that engages in a section 355 distri-
bution and a later conversion transaction
recognizes immediate gain only on prop-

April 22, 2019 1070 Bulletin No. 2019–17
erty that is traceable to the section 355
distribution. Application of the limitation
could cause a single conversion trans-
action to result in some property being
subject to deemed sale treatment and oth-
er property being subject to section1374
treatment. However, the Treasury Depart-
ment and the IRS have determined that
this approach is administrable by both tax-
payers and the IRS and that it satisfies the
concerns expressed by E.O. 13789, Notice
2017-38, and the Second Report. Because
application of the limitation results in only
property held immediately after the relat-
ed section 355 distribution being subject
to deemed sale treatment, the property of
a successor to the distributing corpora-
tion, the controlled corporation, or a SAG
member will not be subject to deemed sale
treatment unless such property is distribu-
tion property from a related section 355
distribution involving the successor.
A commenter suggested an approach
pursuant to which distribution property
subject to deemed sale treatment as a re-
sult of the general rule could be deemed
to be sold for its fair market value at the
time of the related section 355 distribu-
tion. However, the commenter stated that
this approach “may be objectionable giv-
en [E.O. 13789’s] focus on reducing com-
plexity and taxpayer burdens in Treasury
regulations,” because it would require
taxpayers to perform a valuation of their
assets at the time of a related section 355
distribution and to keep records of the val-
uation in case the taxpayer engages in a
later conversion transaction. In the com-
menter’s view, this valuation and record
keeping would be burdensome and result
in administrative difficulties for both tax-
payers and the IRS. The Treasury Depart-
ment and the IRS agree.
In addition, section 1374 treatment
would need to be applied to post-distribu-
tion appreciation to prevent it from inap-
propriately escaping corporate-level taxa-
tion. As a result, an individual asset that is
distribution property would be subject to
deemed sale treatment on the gain inherent
in the asset at the time of the related sec-
tion 355 distribution, and to section 1374
treatment on the appreciation in such asset
after the post-distribution period. This re-
sult further increases the burdens and ad-
ministrative difficulties imposed by the al-
ternative approach. Because this approach
is inconsistent with the goal of reducing
administrative burdens described in E.O.
13789 and reflected in Notice 2017-38
and the Second Report, the Treasury De-
partment and the IRS decline to adopt this
approach.
II. Predecessors and Successors of SAG
Members
The Treasury Department and the IRS
are aware of certain situations in which
the predecessor or successor to a SAG
member would not itself be a SAG mem-
ber immediately before or after, respec-
tively, the transaction giving rise to the
predecessor-successor relationship. To
prevent avoidance, the proposed regula-
tions would expand the rule of proposed
§1.337(d)-7(f)(2) so that references to a
member of the separate affiliated group
of the distributing corporation or the con-
trolled corporation include references to
any successor of such member.
III. Additional Comments
A commenter described an example
similar to the following example (Exam-
ple Three): Distributing is a C corpora-
tion that holds real estate assets with $1
billion fair market value and $0 adjusted
basis. Distributing owns 100 percent of
the stock of Controlled, which holds as-
sets with $100,000 fair market value and
$0 adjusted basis. In Year 1, Distributing
distributes the stock of Controlled in a
section 355 distribution. In Year 10, Dis-
tributing merges into a REIT.
Under the 2016 Proposed Regulations,
Distributing would have been treated as
making a deemed sale election as a result
of engaging in a conversion transaction
(the merger) during the ten-year period
following a section 355 distribution. Ac-
cordingly, Distributing would have recog-
nized $1 billion gain as a result of being
treated as selling all of its real estate as-
sets. The commenter argued that requiring
a C corporation to recognize the built-in
gain on assets worth $1 billion because of
a distribution of assets worth $100,000 in
an earlier year “seems absurd.” The Trea-
sury Department and the IRS disagree.
Section 856(c)(8), which was added by
section 311 of the Protecting Americans
Against Tax Hikes Act of 2015 (PATH
Act), enacted as Division Q of the Con-
solidated Appropriations Act, 2016, Pub-
lic Law 114-113, 129 Stat. 2422, prevents
the distributing corporation, the controlled
corporation, and any successor to the dis-
tributing corporation or the controlled cor-
poration from electing REIT status for ten
years following a section 355 distribution.
Section 856(c)(8) applies regardless of
any disparity in size between the distrib-
uting corporation and the controlled cor-
poration. The commenter did not identify
any reason a merger into a REIT should be
treated more favorably than a conversion
to a REIT. Accordingly, the Treasury De-
partment and the IRS have determined that
application of the 2016 Proposed Regula-
tions in the hypothetical presented by the
commenter is consistent with the intent of
Congress expressed by the PATH Act. The
newly proposed regulations would not
change this rule.
The Treasury Department and the IRS
continue to study the Temporary Regula-
tions and the 2016 Proposed Regulations,
including issues raised by the comments,
and welcome further comments on those
issues.
Special Analyses
This regulation is not subject to review
under section 6(b) of Executive Order
12866 pursuant to the Memorandum of
Agreement (April 11, 2018) between the
Department of the Treasury and the Of-
fice of Management and Budget regard-
ing review of tax regulations. Pursuant to
the Regulatory Flexibility Act (5 U.S.C.
chapter 6), it is hereby certified that these
proposed regulations will not have a sig-
nificant economic impact on a substantial
number of small entities. These proposed
regulations would affect transactions in
which property of a C corporation be-
comes the property of a REIT following
a section 355 distribution of controlled C
corporation stock. Generally, these section
355 distributions involve publicly traded
C corporations, which typically are not
small entities as defined by the Regulatory
Flexibility Act. Transactions in which the
property of such C corporation becomes
the property of a REIT generally involve
the transfer of all of the assets of the C cor-
poration. Therefore, the transferee REIT
likely also would not be a small entity, as

Bulletin No. 2019–17 1071 April 22, 2019
defined by the Regulatory Flexibility Act.
As a result, this certification is based on
the conclusion that these proposed regu-
lations would primarily affect large C cor-
porations and REITs that have substantial
numbers of shareholders. Therefore, a reg-
ulatory flexibility analysis is not required.
Pursuant to section 7805(f) of the Code,
this regulation has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue
Rulings, Notices, and other guidance cited
in this preamble are published in the In-
ternal Revenue (or Cumulative Bulletin)
and are available from the Superintendent
of Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at http://www.irs.
gov.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the “Addresses”
heading. The Treasury Department and
the IRS request comments on all aspect of
the proposed rules. In particular, the Trea-
sury Department and the IRS are request-
ing comments whether further guidance is
necessary regarding how taxpayers should
be permitted to establish whether prop-
erty is or is not distribution property. All
comments will be available at http://www.
regulations.gov or upon request. A public
hearing will be scheduled in writing by
any person that timely submits written
comments. If a public hearing is sched-
uled, notice of the date, time, and place of
the public hearing will be published in the
Federal Register.
Drafting Information
The principal author of these regula-
tions is Austin Diamond-Jones, Office
of Associate Chief Counsel (Corporate).
However, other personnel from the Trea-
sury Department and the IRS participated
in their development.
*****
Partial Withdrawal of Notice of
Proposed Rulemaking
Accordingly, under the authority of 26
U.S.C. 7805 and 337(d), §§ 1.337(d)-7(c)
(6), 1.337(d)-7(f), 1.337(d)-7(g)(2)(ii),
and 1.337(d)-7(g)(2)(iv) of the notice of
proposed rulemaking that was published
in the Federal Register on June 8, 2016
(81 FR 36816), are withdrawn.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
Part 1— INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Par. 2. Section 1.337(d)-7 is amended
by adding paragraph (a)(2)(viii) and revis-
ing paragraphs (c)(6), (f), and (g)(2)(ii).
§1.337(d)-7 Tax on property owned by
a C corporation that becomes property of
a RIC or REIT.
(a) * * *
(2) * * *
(viii) Distribution property. The term
distribution property means—
(A) property owned immediately after a
section 355 distribution by the distributing
corporation, a controlled corporation (as
those terms are defined in section 355(a)
(1)), or a member of a separate affiliated
group (as defined in section 355(b)(3)(B))
of which the distributing corporation or a
controlled corporation is the common par-
ent (but no formulation of the step trans-
action doctrine will be used to determine
whether property acquired after the distri-
bution is distribution property pursuant to
this paragraph (a)(2)(viii)(A)), and
(B) property with a basis determined,
directly or indirectly, in whole or in part,
by reference to property described in para-
graph (a)(2)(viii)(A) of this section.
* * * * *
(c) * * *
(6) Conversion transaction following
a section 355 distribution—(i) In gener-
al. Except as provided in paragraph (c)
(6)(ii) of this section, a C corporation de-
scribed in paragraph (f)(1) of this section
is treated as having made the election un-
der paragraph (c)(5) of this section with
respect to a conversion transaction if the
conversion transaction occurs following
the related section 355 distribution (as de-
fined in paragraph (f)(1)(i) of this section)
and the C corporation has not made such
an election.
(ii) Limitation. A C corporation treated
as having made the election under para-
graph (c)(5) of this section as a result of
paragraph (c)(6)(i) of this section is not
treated as having made the election with
respect to property that the taxpayer es-
tablishes is not distribution property with
respect to the related section 355 distribu-
tion. For purposes of this paragraph (c)(6)
(ii), any property with an adjusted basis in
excess of its fair market value as of the
date of the conversion transaction will not
be treated as distribution property unless
the taxpayer establishes that it owned such
asset immediately after the related section
355 distribution. If the limitation applies,
then paragraph (b) of this section will ap-
ply to the property that is not distribution
property with respect to the related section
355 distribution.
* * * * *
(f) Conversion transaction preceding
or following a section 355 distribution—
(1) In general. A C corporation or a REIT
is described in this paragraph (f)(1) if—
(i) The C corporation or the REIT en-
gages in a conversion transaction involv-
ing a REIT during the twenty-year period
beginning on the date that is ten years be-
fore the date of a section 355 distribution
(the related section 355 distribution); and
(ii) The C corporation or the REIT en-
gaging in the related section 355 distribu-
tion is either—
(A) The distributing corporation or the
controlled corporation, as those terms are
defined in section 355(a)(1); or
(B) A member of the separate affiliated
group (as defined in section 355(b)(3)(B))
of the distributing corporation or the con-
trolled corporation.
(2) Predecessors and successors. For
purposes of this paragraph (f), any ref-
erence to a controlled corporation, a dis-
tributing corporation, or a member of the
separate affiliated group of a distributing
corporation or a controlled corporation in-

April 22, 2019 1072 Bulletin No. 2019–17
cludes a reference to any predecessor or
successor of such corporation. Predeces-
sors and successors include corporations
which succeed to and take into account
items described in section 381(c) of the
distributing corporation or the controlled
corporation, and corporations having such
items to which the distributing corpora-
tion or the controlled corporation succeed-
ed and took into account.
(3) Exclusion of certain conversion
transactions. A C corporation or a REIT
is not described in paragraph (f)(1) of this
section if—
(i) The distributing corporation and
the controlled corporation are both REITs
immediately after the related section 355
distribution (including by reason of elec-
tions under section 856(c)(1) made after
the related section 355 distribution that
are effective before the related section
355 distribution) and at all times during
the two years thereafter;
(ii) Section 355(h)(1) does not apply to
the related section 355 distribution by rea-
son of section 355(h)(2)(B); or
(iii) The related section 355 distribution
is described in a ruling request referred
to in section 311(c) of Division Q of the
Consolidated Appropriations Act, 2016,
Public Law 114-113, 129 Stat. 2422.
(g) * * *
(2) * * *
(ii) Conversion transactions occurring
on or after the date these regulations are
published in the Federal Register as fi-
nal regulations. Paragraphs (a)(1), (a)(2)
(vi), (a)(2)(vii), (a)(2)(viii), (b)(4), (c)(1),
(c)(6), and (f) of this section will apply
to conversion transactions occurring 30
days after the date these regulations are
published in the Federal Register as fi-
nal regulations, and to conversion trans-
actions and related section 355 distribu-
tions for which the conversion transaction
occurs before, and the related section 355
distribution occurs on or after, the date
that is 30 days after the date these regu-
lations are published in the Federal Reg-
ister as final regulations. For conversion
transactions that occurred on or after June
7, 2016 and before the date that is 30 days
after these regulations are published in
the Federal Register as final regulations,
see §§1.337(d)-7 and 1.337(d)-7T as con-
tained in 26 CFR part 1 in effect on April
1, 2018.
However, taxpayers may consistent-
ly apply paragraphs (a)(1), (a)(2)(vi), (a)
(2)(vii), (a)(2)(viii), (b)(4), (c)(1), (c)(6),
and (f) of this section in their entirety for
all conversion transactions described in
the preceding sentence. For conversion
transactions that occurred on or after Jan-
uary 2, 2002 and before June 7, 2016, see
§1.337(d)-7 as contained in 26 CFR part 1
in effect on April 1, 2016.
* * * * *
Kirsten Wielobob
Deputy Commissioner for Services
and Enforcement
(Filed by the Office of the Federal Register on March
25, 2019, 8:45 a.m., and published in the issue of the
Federal Register for March 26, 2019, 84 F.R. 11259)
Proposed Rule; Withdrawal
The Allocation of
Consideration and
Allocation and Recovery
of Basis in Transactions
Involving Corporate Stock
or Securities; Withdrawal.
REG-143686-07
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Proposed rule; withdrawal.
SUMMARY: This document withdraws
a notice of proposed rulemaking contain-
ing proposed regulations under numerous
sections of the Internal Revenue Code
(Code). The proposed regulations being
withdrawn would have provided guidance
on the recovery of stock basis in distribu-
tions of property made by a corporation
to a shareholder and certain transactions
treated as dividend-equivalents, as well
as guidance regarding the determination
of gain and the basis of stock or securities
received in certain transactions. The pro-
posed regulations being withdrawn would
have affected shareholders and security
holders of corporations.
DATES: As of March 28, 2019, the notice
of proposed rulemaking

that was published
in the Federal Register (74 FR 3509) on
January 21, 2009, with corrections pub-
lished in the Federal Register (74 FR
9575) on March 5, 2009, is withdrawn.
FOR FURTHER INFORMATION CON-
TACT: Kevin M. Jacobs at (202) 317-
5332 or Aglaia Ovtchinnikova at (202)
317-6975 (neither a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On January 21, 2009, the Department
of the Treasury (Treasury Department)
and the IRS published a notice of proposed
rulemaking (REG-143686-07) in the Fed-
eral Register (74 FR 3509) containing
proposed regulations under sections 301,
302, 304, 351, 354, 355, 356, 358, 368,
861, 1001, and 1016 of the Code. On
March 5, 2009, the Treasury Department
and the IRS published corrections to the
notice of proposed rulemaking in the Fed-
eral Register (74 FR 9575) (collectively,
the 2009 Proposed Regulations).
The 2009 Proposed Regulations gener-
ally would have provided a single model
for stock basis recovery by a shareholder
that receives a distribution to which sec-
tion 301 applies and a single model for
sale and exchange transactions to which
section 302(a) applies, including certain
elements of an exchange in pursuance
of a plan of reorganization under section
368. The 2009 Proposed Regulations also
would have defined the scope of the ex-
change that must be analyzed under par-
ticular Code provisions and provided a
methodology for determining gain under
section 356 and stock basis under section
358.
The 2009 Proposed Regulations re-
sponded to comments received by the
Treasury Department and the IRS regard-
ing the then-recently published section
358 regulations. These comments includ-
ed suggestions to expand the tracing rules
of the section 358 regulations to stock
transfers that are subject to section 351
but do not qualify as reorganizations, as
well as questions regarding whether (and,
if so, to what extent) shareholder elec-
tions constitute terms of an exchange and
whether the terms of an exchange control
for purposes of qualifying a transaction as
a reorganization under section 368.

Bulletin No. 2019–17 1073 April 22, 2019
Finally, the 2009 Proposed Regulations
included amendments to the current regu-
lations under section 304 that would have
updated those regulations to reflect statu-
tory amendments to that section. See sec-
tion 226 of the Tax Equity and Fiscal Re-
sponsibility Act of 1982, Pub. L. 97–248
(96 Stat. 325, 490) (September 3, 1982),
section 712(l) of the Deficit Reduction
Act of 1984, Pub. L. 98–369 (98 Stat. 494,
953–55) (July 18, 1984), section 1875(b)
of the Tax Reform Act of 1986, Pub. L.
99–514 (100 Stat. 2085, 2894) (October
22, 1986), and section 1013 of the Tax-
payer Relief Act of 1997, Pub. L. 105–34
(111 Stat. 788, 918) (August 5, 1997).

The Treasury Department and the IRS
received many comments regarding the
2009 Proposed Regulations. The chief
concern raised by commenters was that
the approach taken in the 2009 Proposed
Regulations represented an unwarranted
departure from current law as a result of
which minor changes to an overall busi-
ness transaction could cause meaningful
changes to the tax consequences, thereby
elevating the form of the transaction over
its substance.
After thoroughly considering the com-
ments received, the Treasury Department
and the IRS have determined that it is un-
likely that the approach of the 2009 Pro-
posed Regulations can be implemented in
comprehensive final regulations without
significant modifications. As a result, the
Treasury Department and the IRS have de-
cided to withdraw the 2009 Proposed Reg-
ulations. The Treasury Department and the
IRS are continuing to study the issues ad-
dressed in the 2009 Proposed Regulations,
with a particular focus on issues surround-
ing sections 301(c)(2) and 304, and §1.302-
2(c) of the Income Tax Regulations.
The Treasury Department and the IRS
continue to believe that under current law,
the results of a section 301 distribution
should derive from the consideration re-
ceived by a shareholder in respect of each
share of stock, notwithstanding designa-
tions otherwise. See Johnson v. United
States, 435 F.2d 1257 (4th Cir. 1971). The
Treasury Department and the IRS also
continue to believe that, under current law,
with respect to redemptions governed by
section 302(d), any unrecovered basis in
the redeemed stock of a shareholder may
be shifted to other stock only if such an
adjustment is a proper adjustment within
the meaning of §1.302-2(c). Not all shifts
of a redeemed shareholder’s unrecovered
basis result in proper adjustments, and
certain basis adjustments can lead to inap-
propriate results. See, e.g., Notice 2001-
45, 2001-33 I.R.B. 129.
Drafting Information
The principal author of this withdraw-
al notice is Aglaia Ovtchinnikova of the
Office of Associate Chief Counsel (Cor-
porate). However, other personnel from
the Treasury Department and the IRS par-
ticipated in its development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Withdrawal of Notice of Proposed
Rulemaking
Accordingly, under the authority of 26
U.S.C. 7805, the Treasury Department and
the IRS withdraw the notice of proposed
rulemaking (REG-143686-07) that was
published in the Federal Register (74 FR
3509) on January 21, 2009, with correc-
tions that were published in the Federal
Register (74 FR 9575) on March 5, 2009.
Kirsten Wielobob,
Deputy Commissioner for Services
and Enforcement.
(Filed by the Office of the Federal Register on March
27, 2019, 8:45 a.m., and published in the issue of the
Federal Register for March 28, 2019, 84 F.R. 11686)
Withdrawal of Notice of
Proposed Rulemaking
REG-124627-11
Corporate Reorganizations;
Guidance on the
Measurement of Continuity
of Interest
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Withdrawal of notice of pro-
posed rulemaking.
SUMMARY: This document withdraws a
notice of proposed rulemaking that would
have provided guidance on how to deter-
mine whether certain transactions satisfy
the continuity of interest (COI) require-
ment under §1.368-1(e), applicable to cer-
tain corporate reorganizations described in
section 368 of the Internal Revenue Code
of 1986 (Code). The proposed regulations
being withdrawn would have affected cor-
porations and their shareholders.
DATES: As of April 1, 2019, the proposed
amendment to §1.368-1 in the notice of
proposed rulemaking (REG-124627-11)
that was published in the Federal Regis-
ter (76 FR 78591) on December 19, 2011,
is withdrawn.
FOR FURTHER INFORMATION CON-
TACT: Jean R. Broderick at (202) 317-
6848 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The provisions of subchapter C, chapter
1, of the Code generally provide nonrec-
ognition treatment for corporate transac-
tions that are described as reorganizations
in section 368. The COI requirement is
one of a number of requirements that a
transaction must satisfy in order to qualify
as a reorganization. The COI requirement
prevents transactions that resemble sales
from qualifying as reorganizations. Pi-
nellas Ice & Cold Storage Co. v. Commis-
sioner, 287 U.S. 462 (1933).
The COI requirement requires that, in
substance, a substantial part of the value
of the target corporation (Target) share-
holders’ proprietary interests (i.e., stock)
in Target be preserved. Section 1.368-1(e)
(1)(i); John A. Nelson Co. v. Helvering,
296 U.S. 374 (1935). A Target sharehold-
er’s proprietary interest in Target is pre-
served to the extent it is exchanged for ei-
ther the stock of the acquiring corporation
(Acquiror) or, in the case of a triangular
reorganization (as defined in §1.358-6(b)
(2)), the stock of a corporation in control
(within the meaning of section 368(c))
of Acquiror (in either case, Issuing Cor-

April 22, 2019 1074 Bulletin No. 2019–17
poration stock). To the extent the Target
shareholders’ proprietary interests are ex-
changed for money or other property, their
proprietary interests are not preserved.
Section 1.368-1(e)(1)(i).
To determine whether a substantial
part of the Target shareholders’ propri-
etary interests has been preserved, the
value of the Issuing Corporation stock
the Target shareholders received is
compared to the aggregate value of the
consideration the Target shareholders
received. Prior to 2011, the determina-
tion of whether the COI requirement is
satisfied had been based on the value
of the Issuing Corporation stock “as of
the effective date of the reorganization”
(Closing Date). Rev. Proc. 77-37 (1977-
2 C.B. 568).
On December 19, 2011, the Depart-
ment of the Treasury (Treasury Depart-
ment) and the IRS issued final regulations
(TD 9565, 76 FR 78540) that include a
special rule (Signing Date Rule) that ap-
plies if a binding contract to effect a po-
tential reorganization provides for fixed
consideration (as defined in §1.368-1(e)
(2)(iii)(A)) to be exchanged for the Target
shareholders’ proprietary interests. Sec-
tion 1.368-1(e)(2)(i). If the Signing Date
Rule applies, the consideration is valued
as of the end of the last business day be-
fore the first date there is a binding con-
tract (Pre-signing Date), rather than on the
Closing Date.
On the same date, the Treasury De-
partment and the IRS published proposed
regulations (2011 Proposed Regulations)
(REG-124627-11, 76 FR 78591) that
identified situations, other than those cov-
ered by the Signing Date Rule, in which
the value of Issuing Corporation stock
could be determined based on a value oth-
er than its actual trading price on the Clos-
ing Date. In one of these situations, the
2011 Proposed Regulations would have
allowed the parties to use an average of
the trading prices of Issuing Corporation
stock over a number of days, in lieu of its
actual trading price on the Closing Date,
for purposes of determining whether the
COI requirement is satisfied.
The Treasury Department and the IRS
have determined that current law general-
ly provides sufficient guidance to taxpay-
ers with respect to the COI requirement.
Therefore, the Treasury Department and
the IRS have decided to withdraw the
2011 Proposed Regulations. However, af-
ter considering comments received on the
2011 Proposed Regulations, the IRS has
concluded that, in certain circumstances,
taxpayers should be able to rely on certain
average stock valuation methods for pur-
poses of measuring COI. Accordingly, the
IRS issued a revenue procedure effective
January 23, 2018, that provides the cir-
cumstances under which the IRS will not
challenge a taxpayer’s use of certain stock
valuation methods to value certain Issuing
Corporation stock for purposes of deter-
mining whether the COI requirement is
satisfied. See Rev. Proc. 2018-12, I.R.B.
2018-6.
Statement of Availability of IRS
Documents
Rev. Proc. 2018-12 is published in the
Internal Revenue Bulletin and is available
from the Superintendent of Documents,
U.S. Government Publishing Office,
Washington, DC 20402, or by visiting the
IRS website at http://www.irs.gov.
Drafting Information
The principal author of this withdraw-
al notice is Jean Broderick of the Office
of Associate Chief Counsel (Corporate).
However, other personnel from the Trea-
sury Department and the IRS participated
in its development.
* * * * *
Withdrawal of Notice of Proposed
Rulemaking
Accordingly, under the authority of
26 U.S.C. 7805, the notice of proposed
rulemaking (REG-124627-11) that was
published in the Federal Register (76 FR
78591) on December 19, 2011, is with-
drawn.
Kirsten Wielobob,
Deputy Commissioner for Services
and Enforcement.
(Filed by the Office of the Federal Register on March
29, 2019, 8:45 a.m., and published in the issue of the
Federal Register for April 1, 2019, 84 F.R. 12169)

Bulletin No. 2019–17 i April 22, 2019
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

April 22, 2019 ii Bulletin No. 2019–17
Numerical Finding List
1
Bulletin 2019–17
Action on Decision:
2019-1, 2019-08 I.R.B. 569
Announcements:
2019-1, 2019-06 I.R.B. 566
2019-2, 2019-12 I.R.B. 910
2019-3, 2019-15 I.R.B. 965
Notices:
2019-01, 2019-02 I.R.B. 275
2019-02, 2019-02 I.R.B. 281
2019-03, 2019-03 I.R.B. 350
2019-04, 2019-02 I.R.B. 282
2019-05, 2019-02 I.R.B. 283
2019-06, 2019-03 I.R.B. 353
2019-07, 2019-09 I.R.B. 740
2019-08, 2019-03 I.R.B. 354
2019-09, 2019-04 I.R.B. 403
2019-10, 2019-13 I.R.B. 913
2019-11, 2019-05 I.R.B. 430
2019-13, 2019-08 I.R.B. 580
2019-16, 2019-10 I.R.B. 763
2019-17, 2019-12 I.R.B. 907
2019-18, 2019-13 I.R.B. 915
2019-19, 2019-12 I.R.B. 907
2019-20, 2019-14 I.R.B. 927
2019-21, 2019-14 I.R.B. 927
2019-22, 2019-14 I.R.B. 931
2019-23, 2019-15 I.R.B. 941
2019-24, 2019-14 I.R.B. 932
2019-25, 2019-15 I.R.B. 942
2019-26, 2019-15 I.R.B. 943
Proposed Regulations:
REG-104259-18, 2019-02 I.R.B. 300
REG-104352-18, 2019-03 I.R.B. 357
REG-106089-18, 2019-05 I.R.B. 431
REG-134652-18, 2019-09 I.R.B. 747
REG-141739-08, 2019-09 I.R.B. 757
REG-121694-16, 2019-16 I.R.B. 1032
REG-135671-17, 2019-16 I.R.B. 1035
REG-103083-18, 2019-17 I.R.B. 1046
REG-113943-17, 2019-17 I.R.B. 1067
REG-143686-07, 2019-17 I.R.B. 1072
REG-124627-11, 2019-17 I.R.B. 1073
Revenue Procedures:
2019-1, 2019-01 I.R.B. 1
2019-2, 2019-01 I.R.B. 106
2019-3, 2019-01 I.R.B. 130
2019-4, 2019-01 I.R.B. 146
2019-5, 2019-01 I.R.B. 230
Revenue Procedures:—Continued
2019-6, 2019-02 I.R.B. 284
2019-7, 2019-01 I.R.B. 268
2019-8, 2019-03 I.R.B. 347
2019-9, 2019-02 I.R.B. 293
2019-10, 2019-02 I.R.B. 296
2019-11, 2019-09 I.R.B. 742
2019-12, 2019-04 I.R.B. 401
2019-13, 2019-09 I.R.B. 744
2019-14, 2019-15 I.R.B. 948
2019-15, 2019-14 I.R.B. 939
2019-17, 2019-17 I.R.B. 1045
Revenue Rulings:
2019-03, 2019-02 I.R.B. 272
2019-04, 2019-07 I.R.B. 567
2019-05, 2019-11 I.R.B. 766
2019-06, 2019-14 I.R.B. 919
2019-07, 2019-10 I.R.B. 761
2019-08, 2019-14 I.R.B. 923
2019-09, 2019-14 I.R.B. 925
2019-10, 2019-16 I.R.B. 1010
2019-11, 2019-17 I.R.B. 1041
Treasury Decisions:
9844, 2019-11 I.R.B. 781
9845, 2019-08 I.R.B. 570
9846, 2019-09 I.R.B. 583
9847, 2019-09 I.R.B. 670
9848, 2019-11 I.R.B. 897
9850, 2019-12 I.R.B. 904
9852, 2019-16 I.R.B. 1010
9853, 2019-16 I.R.B. 1026
9855, 2019-17 I.R.B. 1042
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

Bulletin No. 2019–17 iii April 22, 2019
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2019–17
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

Internal Revenue Service
Washington, DC 20224
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INTERNAL REVENUE BULLETIN
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