Subchapter B—Computation of Taxable Income
Editorial Notes
Amendments
1982—
1977—
1976—
1962—
1 Part heading amended by
PART I—DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE INCOME, ETC.
Editorial Notes
Amendments
1990—
1986—
1984—
1980—
1976—
§61. Gross income defined
(a) General definition
Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:
(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Annuities;
(9) Income from life insurance and endowment contracts;
(10) Pensions;
(11) Income from discharge of indebtedness;
(12) Distributive share of partnership gross income;
(13) Income in respect of a decedent; and
(14) Income from an interest in an estate or trust.
(b) Cross references
For items specifically included in gross income, see part II (sec. 71 and following). For items specifically excluded from gross income, see part III (sec. 101 and following).
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2017—Subsec. (a)(8) to (15).
1984—Subsec. (a)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
"(1) any divorce or separation instrument (as defined in section 71(b)(2) of the Internal Revenue Code of 1986 as in effect before the date of the enactment of this Act [Dec. 22, 2017]) executed after December 31, 2018, and
"(2) any divorce or separation instrument (as so defined) executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification."
Effective Date of 1984 Amendment
Amendment by
Termination Date of 1978 Amendment
Regulations
"(a)
"(1) in final form on or after May 1, 1978, and on or before December 31, 1983, or
"(2) in proposed or final form on or after May 1, 1978, if such regulation has an effective date on or before December 31, 1983.
"(b)
No Gain Recognized From Net Gifts Made Before March 4, 1981
"(a)
"(b)
"(1) the tax imposed by
"(2) any tax imposed by a State (or the District of Columbia) on transfers by gifts.
"(c)
Payment-in-Kind Tax Treatment Act of 1983
"SECTION 1. SHORT TITLE.
"This Act may be cited as the 'Payment-in-Kind Tax Treatment Act of 1983'.
"SEC. 2. INCOME TAX TREATMENT OF AGRICULTURAL COMMODITIES RECEIVED UNDER A 1983 PAYMENT-IN-KIND PROGRAM.
"(a)
"(1) a qualified taxpayer shall not be treated as having realized income when he receives a commodity under a 1983 payment-in-kind program,
"(2) such commodity shall be treated as if it were produced by such taxpayer, and
"(3) the unadjusted basis of such commodity in the hands of such taxpayer shall be zero.
"(b)
"SEC. 3. LAND DIVERTED UNDER 1983 PAYMENT-IN-KIND PROGRAM TREATED AS USED IN FARMING BUSINESS, ETC.
"(a)
"(1) such land shall be treated as used during the 1983 crop year by the qualified taxpayer in the active conduct of the trade or business of farming, and
"(2) any qualified taxpayer who materially participates in the diversion and devotion to conservation uses required under a 1983 payment-in-kind program shall be treated as materially participating in the operation of such land during such crop year.
"(b)
"(1) section 2032A of the Internal Revenue Code of 1986 (relating to valuation of certain farm, etc., real property),
"(2) section 6166 of such Code (relating to extension of time for payment of estate tax where estate consists largely of interest in closely held business),
"(3)
"(4) title II of the Social Security Act [
"SEC. 4. ANTIABUSE RULES.
"(a)
"(b)
"(1) by reason of the death of a qualified transferor,
"(2) by reason of a gift from a qualified transferor, or
"(3) from a qualified transferor who is a member of the family of the person acquiring the land.
"(c)
"(1)
"(A) who held the land on February 23, 1983, or
"(B) who acquired the land after February 23, 1983, in a qualified acquisition.
"(2)
"(3)
"(4)
"SEC. 5. DEFINITIONS AND SPECIAL RULES.
"(a)
"(1) 1983
"(A) under which the Secretary of Agriculture (or his delegate) makes payments in kind of any agricultural commodity to any person in return for—
"(i) the diversion of farm acreage from the production of an agricultural commodity, and
"(ii) the devotion of such acreage to conservation uses, and
"(B) which the Secretary of Agriculture certifies to the Secretary of the Treasury as being described in subparagraph (A).
"(2)
"(3)
"(4)
"(5)
"(6)
"(b)
"(1) any reference in this Act to the 1983 crop year shall include a reference to the 1984 crop year, and
"(2) any reference to the 1983 payment-in-kind program shall include a reference to any program for the 1984 year for wheat which meets the requirements of subparagraphs (A) and (B) of subsection (a)(1).
"(c)
[
Cancellation of Certain Student Loans
Regulations Relating to Tax Treatment of Certain Prepublication Expenditures of Publishers
"(a)
"(1) without regard to Revenue Ruling 73–395, and
"(2) in the manner in which such sections were applied consistently by the taxpayer to such expenditures before the date of the issuance of such revenue ruling.
"(b)
"(c)
Reimbursement of Moving Expenses of Employees of Certain Corporations Excluded From Gross Income; Claim for Refund or Credit; Limitations; Interest
§62. Adjusted gross income defined
(a) General rule
For purposes of this subtitle, the term "adjusted gross income" means, in the case of an individual, gross income minus the following deductions:
(1) Trade and business deductions
The deductions allowed by this chapter (other than by part VII of this subchapter) which are attributable to a trade or business carried on by the taxpayer, if such trade or business does not consist of the performance of services by the taxpayer as an employee.
(2) Certain trade and business deductions of employees
(A) Reimbursed expenses of employees
The deductions allowed by part VI (section 161 and following) which consist of expenses paid or incurred by the taxpayer, in connection with the performance by him of services as an employee, under a reimbursement or other expense allowance arrangement with his employer. The fact that the reimbursement may be provided by a third party shall not be determinative of whether or not the preceding sentence applies.
(B) Certain expenses of performing artists
The deductions allowed by section 162 which consist of expenses paid or incurred by a qualified performing artist in connection with the performances by him of services in the performing arts as an employee.
(C) Certain expenses of officials
The deductions allowed by section 162 which consist of expenses paid or incurred with respect to services performed by an official as an employee of a State or a political subdivision thereof in a position compensated in whole or in part on a fee basis.
(D) Certain expenses of elementary and secondary school teachers
The deductions allowed by section 162 which consist of expenses, not in excess of $250, paid or incurred by an eligible educator—
(i) by reason of the participation of the educator in professional development courses related to the curriculum in which the educator provides instruction or to the students for which the educator provides instruction, and
(ii) in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom.
(E) Certain expenses of members of reserve components of the Armed Forces of the United States
The deductions allowed by section 162 which consist of expenses, determined at a rate not in excess of the rates for travel expenses (including per diem in lieu of subsistence) authorized for employees of agencies under subchapter I of
(3) Losses from sale or exchange of property
The deductions allowed by part VI (sec. 161 and following) as losses from the sale or exchange of property.
(4) Deductions attributable to rents and royalties
The deductions allowed by part VI (sec. 161 and following), by section 212 (relating to expenses for production of income), and by section 611 (relating to depletion) which are attributable to property held for the production of rents or royalties.
(5) Certain deductions of life tenants and income beneficiaries of property
In the case of a life tenant of property, or an income beneficiary of property held in trust, or an heir, legatee, or devisee of an estate, the deduction for depreciation allowed by section 167 and the deduction allowed by section 611.
(6) Pension, profit-sharing, and annuity plans of self-employed individuals
In the case of an individual who is an employee within the meaning of section 401(c)(1), the deduction allowed by section 404.
(7) Retirement savings
The deduction allowed by section 219 (relating to deduction of certain retirement savings).
[(8) Repealed. Pub. L. 104–188, title I, §1401(b)(4), Aug. 20, 1996, 110 Stat. 1788 ]
(9) Penalties forfeited because of premature withdrawal of funds from time savings accounts or deposits
The deductions allowed by section 165 for losses incurred in any transaction entered into for profit, though not connected with a trade or business, to the extent that such losses include amounts forfeited to a bank, mutual savings bank, savings and loan association, building and loan association, cooperative bank or homestead association as a penalty for premature withdrawal of funds from a time savings account, certificate of deposit, or similar class of deposit.
[(10) Repealed. Pub. L. 115–97, title I, §11051(b)(2)(A), Dec. 22, 2017, 131 Stat. 2089 ]
(11) Reforestation expenses
The deduction allowed by section 194.
(12) Certain required repayments of supplemental unemployment compensation benefits
The deduction allowed by section 165 for the repayment to a trust described in paragraph (9) or (17) of section 501(c) of supplemental unemployment compensation benefits received from such trust if such repayment is required because of the receipt of trade readjustment allowances under section 231 or 232 of the Trade Act of 1974 (
(13) Jury duty pay remitted to employer
Any deduction allowable under this chapter by reason of an individual remitting any portion of any jury pay to such individual's employer in exchange for payment by the employer of compensation for the period such individual was performing jury duty. For purposes of the preceding sentence, the term "jury pay" means any payment received by the individual for the discharge of jury duty.
[(14) Repealed. Pub. L. 113–295, div. A, title II, §221(a)(34)(C), Dec. 19, 2014, 128 Stat. 4042 ]
(15) Moving expenses
The deduction allowed by section 217.
(16) Archer MSAs
The deduction allowed by section 220.
(17) Interest on education loans
The deduction allowed by section 221.
[(18) Repealed. Pub. L. 116–260, div. EE, title I, §104(b)(2)(A), Dec. 27, 2020, 134 Stat. 3041 ]
(19) Health savings accounts
The deduction allowed by section 223.
(20) Costs involving discrimination suits, etc.
Any deduction allowable under this chapter for attorney fees and court costs paid by, or on behalf of, the taxpayer in connection with any action involving a claim of unlawful discrimination (as defined in subsection (e)) or a claim of a violation of subchapter III of
(21) Attorneys' fees relating to awards to whistleblowers
(A) In general
Any deduction allowable under this chapter for attorney fees and court costs paid by, or on behalf of, the taxpayer in connection with any award under—
(i) section 7623(b), or
(ii) in the case of taxable years beginning after December 31, 2017, any action brought under—
(I) section 21F of the Securities Exchange Act of 1934 (
(II) a State false claims act, including a State false claims act with qui tam provisions, or
(III) section 23 of the Commodity Exchange Act (
(B) May not exceed award
Subparagraph (A) shall not apply to any deduction in excess of the amount includible in the taxpayer's gross income for the taxable year on account of such award.
Nothing in this section shall permit the same item to be deducted more than once. Any deduction allowed by section 199A shall not be treated as a deduction described in any of the preceding paragraphs of this subsection.
(b) Qualified performing artist
(1) In general
For purposes of subsection (a)(2)(B), the term "qualified performing artist" means, with respect to any taxable year, any individual if—
(A) such individual performed services in the performing arts as an employee during the taxable year for at least 2 employers,
(B) the aggregate amount allowable as a deduction under section 162 in connection with the performance of such services exceeds 10 percent of such individual's gross income attributable to the performance of such services, and
(C) the adjusted gross income of such individual for the taxable year (determined without regard to subsection (a)(2)(B)) does not exceed $16,000.
(2) Nominal employer not taken into account
An individual shall not be treated as performing services in the performing arts as an employee for any employer during any taxable year unless the amount received by such individual from such employer for the performance of such services during the taxable year equals or exceeds $200.
(3) Special rules for married couples
(A) In general
Except in the case of a husband and wife who lived apart at all times during the taxable year, if the taxpayer is married at the close of the taxable year, subsection (a)(2)(B) shall apply only if the taxpayer and his spouse file a joint return for the taxable year.
(B) Application of paragraph (1)
In the case of a joint return—
(i) paragraph (1) (other than subparagraph (C) thereof) shall be applied separately with respect to each spouse, but
(ii) paragraph (1)(C) shall be applied with respect to their combined adjusted gross income.
(C) Determination of marital status
For purposes of this subsection, marital status shall be determined under section 7703(a).
(D) Joint return
For purposes of this subsection, the term "joint return" means the joint return of a husband and wife made under section 6013.
(c) Certain arrangements not treated as reimbursement arrangements
For purposes of subsection (a)(2)(A), an arrangement shall in no event be treated as a reimbursement or other expense allowance arrangement if—
(1) such arrangement does not require the employee to substantiate the expenses covered by the arrangement to the person providing the reimbursement, or
(2) such arrangement provides the employee the right to retain any amount in excess of the substantiated expenses covered under the arrangement.
The substantiation requirements of the preceding sentence shall not apply to any expense to the extent that substantiation is not required under section 274(d) for such expense by reason of the regulations prescribed under the 2nd sentence thereof.
(d) Definition; special rules
(1) Eligible educator
(A) In general
For purposes of subsection (a)(2)(D), the term "eligible educator" means, with respect to any taxable year, an individual who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.
(B) School
The term "school" means any school which provides elementary education or secondary education (kindergarten through grade 12), as determined under State law.
(2) Coordination with exclusions
A deduction shall be allowed under subsection (a)(2)(D) for expenses only to the extent the amount of such expenses exceeds the amount excludable under section 135, 529(c)(1), or 530(d)(2) for the taxable year.
(3) Inflation adjustment
In the case of any taxable year beginning after 2015, the $250 amount in subsection (a)(2)(D) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "calendar year 2014" for "calendar year 2016" in subparagraph (A)(ii) thereof.
Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $50.
(e) Unlawful discrimination defined
For purposes of subsection (a)(20), the term "unlawful discrimination" means an act that is unlawful under any of the following:
(1) Section 302 of the Civil Rights Act of 1991 (
(2) Section 201, 202, 203, 204, 205, 206, 207, or 208 of the Congressional Accountability Act of 1995 (
(3) The National Labor Relations Act (
(4) The Fair Labor Standards Act of 1938 (
(5) Section 4 or 15 of the Age Discrimination in Employment Act of 1967 (
(6) Section 501 or 504 of the Rehabilitation Act of 1973 (
(7) Section 510 of the Employee Retirement Income Security Act of 1974 (
(8) Title IX of the Education Amendments of 1972 (
(9) The Employee Polygraph Protection Act of 1988 (
(10) The Worker Adjustment and Retraining Notification Act (
(11) Section 105 of the Family and Medical Leave Act of 1993 (
(12)
(13) Section 1977, 1979, or 1980 of the Revised Statutes (
(14) Section 703, 704, or 717 of the Civil Rights Act of 1964 (
(15) Section 804, 805, 806, 808, or 818 of the Fair Housing Act (
(16) Section 102, 202, 302, or 503 of the Americans with Disabilities Act of 1990 (
(17) Any provision of Federal law (popularly known as whistleblower protection provisions) prohibiting the discharge of an employee, the discrimination against an employee, or any other form of retaliation or reprisal against an employee for asserting rights or taking other actions permitted under Federal law.
(18) Any provision of Federal, State, or local law, or common law claims permitted under Federal, State, or local law—
(i) providing for the enforcement of civil rights, or
(ii) regulating any aspect of the employment relationship, including claims for wages, compensation, or benefits, or prohibiting the discharge of an employee, the discrimination against an employee, or any other form of retaliation or reprisal against an employee for asserting rights or taking other actions permitted by law.
(Aug. 16, 1954, ch. 736,
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
References in Text
Section 208 of the Congressional Accountability Act of 1995, referred to in subsec. (e)(2), was formerly section 207 of the Act prior to renumbering by
The National Labor Relations Act, referred to in subsec. (e)(3), is act July 5, 1935, ch. 372,
The Fair Labor Standards Act of 1938, referred to in subsec. (e)(4), is act June 25, 1938, ch. 676,
The Education Amendments of 1972, referred to in subsec. (e)(8), is
The Employee Polygraph Protection Act of 1988, referred to in subsec. (e)(9), is
The Worker Adjustment and Retraining Notification Act, referred to in subsec. (e)(10), is
Amendments
2020—Subsec. (a)(18).
Subsec. (a)(22).
Subsec. (f).
2019—Subsec. (e)(2).
2018—Subsec. (a).
Subsec. (a)(20).
Subsec. (a)(21).
Subsec. (e)(1).
2017—Subsec. (a).
Subsec. (a)(10).
Subsec. (d)(3)(B).
2015—Subsec. (a)(2)(D).
Subsec. (d)(3).
2014—Subsec. (a)(2)(D).
Subsec. (a)(14).
2013—Subsec. (a)(2)(D).
2010—Subsec. (a)(2)(D).
2008—Subsec. (a)(2)(D).
2006—Subsec. (a)(2)(D).
Subsec. (a)(21).
2005—Subsec. (a)(19), (20).
Subsec. (e).
2004—Subsec. (a)(2)(D).
Subsec. (a)(19).
Subsec. (e).
2003—Subsec. (a)(2)(E).
Subsec. (a)(19).
2002—Subsec. (a)(2)(D).
Subsec. (d).
2001—Subsec. (a)(18).
2000—Subsec. (a)(16).
1997—Subsec. (a)(2)(C).
Subsec. (a)(17).
1996—Subsec. (a)(8).
Subsec. (a)(16).
1993—Subsec. (a)(15).
1992—Subsec. (a)(8).
Subsec. (a)(14).
1990—Subsec. (a)(13).
1988—Subsec. (a)(2)(A).
Subsec. (a)(13).
Subsec. (c).
1986—Subsec. (a).
Subsec. (a)(2).
Subsec. (a)(3) to (5).
Subsec. (a)(6).
Subsec. (a)(7).
Subsec. (a)(8).
Subsec. (a)(9) to (15).
Subsec. (a)(16).
Subsec. (b).
1984—Par. (7).
1983—Par. (9).
1981—Par. (10).
Par. (14).
Par. (15).
Par. (16).
1980—Par. (15).
Par. (16).
1978—Par. (14).
1976—Par. (10).
Pars. (11), (12).
Par. (13).
1974—Par. (10).
Par. (11).
1969—Par. (9).
1964—Par. (8).
1962—Par. (7).
Statutory Notes and Related Subsidiaries
Effective Date of 2020 Amendment
Amendment by section 104(b)(2)(A) of
Effective Date of 2018 Amendment
"(1)
"(2)
Effective Date of 2017 Amendment
Amendment by section 11002(d)(1)(J) of
Amendment by section 11051(b)(2)(A) of
Effective Date of 2015 Amendment
"(1)
"(2)
Effective Date of 2014 Amendment
Amendment by section 221(a)(34)(C) of
Effective Date of 2013 Amendment
Effective Date of 2010 Amendment
Effective Date of 2008 Amendment
Effective Date of 2006 Amendment
Effective Date of 2004 Amendment
Effective Date of 2003 Amendment
Effective Date of 2002 Amendment
Effective Date of 2001 Amendment
Effective Date of 1997 Amendment
"(1) any loan interest payment due and paid after December 31, 1997, and
"(2) the portion of the 60-month period referred to in section 221(d) of the Internal Revenue Code of 1986 (as added by this section) after December 31, 1997."
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1993 Amendment
Effective Date of 1992 Amendment
Amendment by
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1001(b)(3)(A) of
Effective Date of 1986 Amendment
Amendment by sections 131(b)(1) and 132(b), (c) of
Effective Date of 1984 Amendment
Effective Date of 1983 Amendment
Par. (9) as in effect before date of repeal by
Effective Date of 1981 Amendment
Amendment by sections 112(b)(2) and 311(h)(1) of
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1978 Amendment; Election of Prior Law
Amendment by
Effective Date of 1976 Amendment
Amendment by section 1901(a)(8), (9) of
Effective Date of 1974 Amendment
Amendment by section 2002(a)(2) of
Amendment by section 2005(c)(9) of
Effective Date of 1969 Amendment
Amendment by
Effective Date of 1964 Amendment
Effective Date of 1962 Amendment
Amendment by
Regulations or Guidance Clarifying Application of Educator Expense Tax Deduction
Savings Provision
For provisions that nothing in amendment by
Plan Amendments Not Required Until January 1, 1998
For provisions directing that if any amendments made by subtitle D [§§1401–1465] of title I of
Plan Amendments Not Required Until January 1, 1994
For provisions directing that if any amendments made by subtitle B [§§521–523] of title V of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Commuting Expenses
1 See References in Text note below.
§63. Taxable income defined
(a) In general
Except as provided in subsection (b), for purposes of this subtitle, the term "taxable income" means gross income minus the deductions allowed by this chapter (other than the standard deduction).
(b) Individuals who do not itemize their deductions
In the case of an individual who does not elect to itemize his deductions for the taxable year, for purposes of this subtitle, the term "taxable income" means adjusted gross income, minus—
(1) the standard deduction,
(2) the deduction for personal exemptions provided in section 151,
(3) any deduction provided in section 199A, and
(4) the deduction provided in section 170(p).
(c) Standard deduction
For purposes of this subtitle—
(1) In general
Except as otherwise provided in this subsection, the term "standard deduction" means the sum of—
(A) the basic standard deduction, and
(B) the additional standard deduction.
(2) Basic standard deduction
For purposes of paragraph (1), the basic standard deduction is—
(A) 200 percent of the dollar amount in effect under subparagraph (C) for the taxable year in the case of—
(i) a joint return, or
(ii) a surviving spouse (as defined in section 2(a)),
(B) $4,400 in the case of a head of household (as defined in section 2(b)), or
(C) $3,000 in any other case.
(3) Additional standard deduction for aged and blind
For purposes of paragraph (1), the additional standard deduction is the sum of each additional amount to which the taxpayer is entitled under subsection (f).
(4) Adjustments for inflation
In the case of any taxable year beginning in a calendar year after 1988, each dollar amount contained in paragraph (2)(B), (2)(C), or (5) or subsection (f) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting for "calendar year 2016" in subparagraph (A)(ii) thereof—
(i) "calendar year 1987" in the case of the dollar amounts contained in paragraph (2)(B), (2)(C), or (5)(A) or subsection (f), and
(ii) "calendar year 1997" in the case of the dollar amount contained in paragraph (5)(B).
(5) Limitation on basic standard deduction in the case of certain dependents
In the case of an individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins, the basic standard deduction applicable to such individual for such individual's taxable year shall not exceed the greater of—
(A) $500, or
(B) the sum of $250 and such individual's earned income.
(6) Certain individuals, etc., not eligible for standard deduction
In the case of—
(A) a married individual filing a separate return where either spouse itemizes deductions,
(B) a nonresident alien individual,
(C) an individual making a return under section 443(a)(1) for a period of less than 12 months on account of a change in his annual accounting period, or
(D) an estate or trust, common trust fund, or partnership,
the standard deduction shall be zero.
(7) Special rules for taxable years 2018 through 2025
In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026—
(A) Increase in standard deduction
Paragraph (2) shall be applied—
(i) by substituting "$18,000" for "$4,400" in subparagraph (B), and
(ii) by substituting "$12,000" for "$3,000" in subparagraph (C).
(B) Adjustment for inflation
(i) In general
Paragraph (4) shall not apply to the dollar amounts contained in paragraphs (2)(B) and (2)(C).
(ii) Adjustment of increased amounts
In the case of a taxable year beginning after 2018, the $18,000 and $12,000 amounts in subparagraph (A) shall each be increased by an amount equal to—
(I) such dollar amount, multiplied by
(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "2017" for "2016" in subparagraph (A)(ii) thereof.
If any increase under this clause is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.
(d) Itemized deductions
For purposes of this subtitle, the term "itemized deductions" means the deductions allowable under this chapter other than—
(1) the deductions allowable in arriving at adjusted gross income, and
(2) any deduction referred to in any paragraph of subsection (b).
(e) Election to itemize
(1) In general
Unless an individual makes an election under this subsection for the taxable year, no itemized deduction shall be allowed for the taxable year. For purposes of this subtitle, the determination of whether a deduction is allowable under this chapter shall be made without regard to the preceding sentence.
(2) Time and manner of election
Any election under this subsection shall be made on the taxpayer's return, and the Secretary shall prescribe the manner of signifying such election on the return.
(3) Change of election
Under regulations prescribed by the Secretary, a change of election with respect to itemized deductions for any taxable year may be made after the filing of the return for such year. If the spouse of the taxpayer filed a separate return for any taxable year corresponding to the taxable year of the taxpayer, the change shall not be allowed unless, in accordance with such regulations—
(A) the spouse makes a change of election with respect to itemized deductions, for the taxable year covered in such separate return, consistent with the change of treatment sought by the taxpayer, and
(B) the taxpayer and his spouse consent in writing to the assessment (within such period as may be agreed on with the Secretary) of any deficiency, to the extent attributable to such change of election, even though at the time of the filing of such consent the assessment of such deficiency would otherwise be prevented by the operation of any law or rule of law.
This paragraph shall not apply if the tax liability of the taxpayer's spouse for the taxable year corresponding to the taxable year of the taxpayer has been compromised under section 7122.
(f) Aged or blind additional amounts
(1) Additional amounts for the aged
The taxpayer shall be entitled to an additional amount of $600—
(A) for himself if he has attained age 65 before the close of his taxable year, and
(B) for the spouse of the taxpayer if the spouse has attained age 65 before the close of the taxable year and an additional exemption is allowable to the taxpayer for such spouse under section 151(b).
(2) Additional amount for blind
The taxpayer shall be entitled to an additional amount of $600—
(A) for himself if he is blind at the close of the taxable year, and
(B) for the spouse of the taxpayer if the spouse is blind as of the close of the taxable year and an additional exemption is allowable to the taxpayer for such spouse under section 151(b).
For purposes of subparagraph (B), if the spouse dies during the taxable year the determination of whether such spouse is blind shall be made as of the time of such death.
(3) Higher amount for certain unmarried individuals
In the case of an individual who is not married and is not a surviving spouse, paragraphs (1) and (2) shall be applied by substituting "$750" for "$600".
(4) Blindness defined
For purposes of this subsection, an individual is blind only if his central visual acuity does not exceed 20/200 in the better eye with correcting lenses, or if his visual acuity is greater than 20/200 but is accompanied by a limitation in the fields of vision such that the widest diameter of the visual field subtends an angle no greater than 20 degrees.
(g) Marital status
For purposes of this section, marital status shall be determined under section 7703.
(Aug. 16, 1954, ch. 736,
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
Codification
Another section 212(b) of div. EE of
Amendments
2020—Subsec. (b)(4).
Subsec. (d)(2), (3).
"(2) the deduction for personal exemptions provided by section 151, and
"(3) any deduction provided in section 199A."
2018—Subsecs. (b)(3), (d)(3).
2017—Subsec. (b)(3).
Subsec. (c)(4)(B).
Subsec. (c)(7).
Subsec. (d)(3).
2014—Subsec. (c)(1).
"(A) the basic standard deduction,
"(B) the additional standard deduction,
"(C) in the case of any taxable year beginning in 2008 or 2009, the real property tax deduction,
"(D) the disaster loss deduction, and
"(E) the motor vehicle sales tax deduction."
Subsec. (c)(7) to (9).
2009—Subsec. (c)(1)(E).
Subsec. (c)(9).
2008—Subsec. (c)(1)(C).
Subsec. (c)(1)(D).
Subsec. (c)(7).
Subsec. (c)(8).
2004—Subsec. (c)(2).
Subsec. (c)(4).
Subsec. (c)(7).
2003—Subsec. (c)(7).
2002—Subsec. (c)(2).
Subsec. (c)(2)(A).
Subsec. (c)(2)(B).
Subsec. (c)(2)(C), (D).
Subsec. (c)(4).
Subsec. (c)(4)(B)(i).
2001—Subsec. (c)(2)(A).
Subsec. (c)(2)(B).
Subsec. (c)(2)(C).
Subsec. (c)(2)(D).
Subsec. (c)(4).
Subsec. (c)(7).
1997—Subsec. (c)(4).
Subsec. (c)(5)(B).
1993—Subsec. (c)(4)(B).
1990—Subsec. (c)(4)(B).
Subsec. (h).
"(1) by substituting '$3,760' for '$5,000',
"(2) by substituting '$2,540' for '$4,400',
"(3) by substituting '$2,540' for '$3,000', and
"(4) by substituting '$1,880' for '$2,500'.
The preceding sentence shall not apply if the taxpayer is entitled to an additional amount determined under subsection (f) (relating to additional amount for aged and blind) for the taxable year."
1988—Subsec. (c)(5).
1986—Subsec. (a).
Subsec. (b).
"(1) reduced by the sum of—
"(A) the excess itemized deductions,
"(B) the deductions for personal exemptions provided by section 151, and
"(C) the direct charitable deduction, and
"(2) increased (in the case of an individual for whom an unused zero bracket amount computation is provided by subsection (e)) by the unused zero bracket amount (if any)."
Subsec. (c).
"(1) the itemized deductions, over
"(2) the zero bracket amount."
Subsec. (c)(6)(C) to (E).
Subsec. (d).
"(1) in the case of an individual to whom subsection (a), (b), (c), or (d) of section 1 applies, the maximum amount of taxable income on which no tax is imposed by the applicable subsection of section 1, or
"(2) zero in any other case."
Subsec. (e).
Subsec. (e)(1).
"(A) a married individual filing a separate return where either spouse itemized deductions,
"(B) a nonresident alien individual,
"(C) a citizen of the United States entitled to the benefits of section 931 (relating to income from sources within possessions of the United States), and
"(D) an individual with respect to whom a deduction under section 151(e) is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins."
Subsec. (e)(2).
"(A) the zero bracket amount, over
"(B) the itemized deductions.
In the case of an individual referred to in paragraph (1)(D), if such individual's earned income (as defined in section 911(d)(2)) exceeds the itemized deductions, such earned income shall be substituted for the itemized deductions in subparagraph (B)."
Subsec. (e)(3).
Subsec. (f).
"(1) the deductions allowable in arriving at adjusted gross income,
"(2) the deductions for personal exemptions provided by section 151, and
"(3) the direct charitable deduction."
Subsec. (g).
Subsec. (h).
Subsec. (i).
1981—Subsec. (b)(1)(C).
Subsec. (d).
Subsec. (e)(2).
Subsec. (f)(3).
Subsec. (i).
1978—
1977—
Statutory Notes and Related Subsidiaries
Effective Date of 2020 Amendment
Amendment by
Effective Date of 2018 Amendment
Amendment by
Effective Date of 2017 Amendment
Amendment by section 11002(d)(1)(K) of
Amendment by section 11011(b)(2), (3) of
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2008 Amendment
Amendment by section 706(b)(1), (2) of
Effective and Termination Dates of 2004 Amendment
Amendment by
Amendment by
Effective and Termination Dates of 2003 Amendment
Amendments by title I of
Effective Date of 2002 Amendment
Amendment by
Effective Date of 2001 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by section 11101(d)(1)(D) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 102(a) of
Amendment by section 1272(d)(6) of
Effective Date of 1981 Amendment
Amendment by section 104(b) of
Amendment by section 111(b)(4) of
Amendment by section 121(b), (c)(2) of
Effective Date of 1978 Amendment
Amendment by
Effective Date of 1977 Amendment
Amendment by
Savings Provision
For provisions that nothing in amendment by section 11801 of
§64. Ordinary income defined
For purposes of this subtitle, the term "ordinary income" includes any gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b). Any gain from the sale or exchange of property which is treated or considered, under other provisions of this subtitle, as "ordinary income" shall be treated as gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b).
(Added
§65. Ordinary loss defined
For purposes of this subtitle, the term "ordinary loss" includes any loss from the sale or exchange of property which is not a capital asset. Any loss from the sale or exchange of property which is treated or considered, under other provisions of this subtitle, as "ordinary loss" shall be treated as loss from the sale or exchange of property which is not a capital asset.
(Added
§66. Treatment of community income
(a) Treatment of community income where spouses live apart
If—
(1) 2 individuals are married to each other at any time during a calendar year;
(2) such individuals—
(A) live apart at all times during the calendar year, and
(B) do not file a joint return under section 6013 with each other for a taxable year beginning or ending in the calendar year;
(3) one or both of such individuals have earned income for the calendar year which is community income; and
(4) no portion of such earned income is transferred (directly or indirectly) between such individuals before the close of the calendar year,
then, for purposes of this title, any community income of such individuals for the calendar year shall be treated in accordance with the rules provided by section 879(a).
(b) Secretary may disregard community property laws where spouse not notified of community income
The Secretary may disallow the benefits of any community property law to any taxpayer with respect to any income if such taxpayer acted as if solely entitled to such income and failed to notify the taxpayer's spouse before the due date (including extensions) for filing the return for the taxable year in which the income was derived of the nature and amount of such income.
(c) Spouse relieved of liability in certain other cases
Under regulations prescribed by the Secretary, if—
(1) an individual does not file a joint return for any taxable year,
(2) such individual does not include in gross income for such taxable year an item of community income properly includible therein which, in accordance with the rules contained in section 879(a), would be treated as the income of the other spouse,
(3) the individual establishes that he or she did not know of, and had no reason to know of, such item of community income, and
(4) taking into account all facts and circumstances, it is inequitable to include such item of community income in such individual's gross income,
then, for purposes of this title, such item of community income shall be included in the gross income of the other spouse (and not in the gross income of the individual). Under procedures prescribed by the Secretary, if, taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency (or any portion of either) attributable to any item for which relief is not available under the preceding sentence, the Secretary may relieve such individual of such liability.
(d) Definitions
For purposes of this section—
(1) Earned income
The term "earned income" has the meaning given to such term by section 911(d)(2).
(2) Community income
The term "community income" means income which, under applicable community property laws, is treated as community income.
(3) Community property laws
The term "community property laws" means the community property laws of a State, a foreign country, or a possession of the United States.
(Added
Editorial Notes
Amendments
1998—Subsec. (c).
1989—Subsec. (d)(1).
1984—
Subsec. (a).
Subsecs. (b) to (d).
Statutory Notes and Related Subsidiaries
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by
Effective Date
§67. 2-percent floor on miscellaneous itemized deductions
(a) General rule
In the case of an individual, the miscellaneous itemized deductions for any taxable year shall be allowed only to the extent that the aggregate of such deductions exceeds 2 percent of adjusted gross income.
(b) Miscellaneous itemized deductions
For purposes of this section, the term "miscellaneous itemized deductions" means the itemized deductions other than—
(1) the deduction under section 163 (relating to interest),
(2) the deduction under section 164 (relating to taxes),
(3) the deduction under section 165(a) for casualty or theft losses described in paragraph (2) or (3) of section 165(c) or for losses described in section 165(d),
(4) the deductions under section 170 (relating to charitable, etc., contributions and gifts) and section 642(c) (relating to deduction for amounts paid or permanently set aside for a charitable purpose),
(5) the deduction under section 213 (relating to medical, dental, etc., expenses),
(6) any deduction allowable for impairment-related work expenses,
(7) the deduction under section 691(c) (relating to deduction for estate tax in case of income in respect of the decedent),
(8) any deduction allowable in connection with personal property used in a short sale,
(9) the deduction under section 1341 (relating to computation of tax where taxpayer restores substantial amount held under claim of right),
(10) the deduction under section 72(b)(3) (relating to deduction where annuity payments cease before investment recovered),
(11) the deduction under section 171 (relating to deduction for amortizable bond premium), and
(12) the deduction under section 216 (relating to deductions in connection with cooperative housing corporations).
(c) Disallowance of indirect deduction through pass-thru entity
(1) In general
The Secretary shall prescribe regulations which prohibit the indirect deduction through pass-thru entities of amounts which are not allowable as a deduction if paid or incurred directly by an individual and which contain such reporting requirements as may be necessary to carry out the purposes of this subsection.
(2) Treatment of publicly offered regulated investment companies
(A) In general
Paragraph (1) shall not apply with respect to any publicly offered regulated investment company.
(B) Publicly offered regulated investment companies
For purposes of this subsection—
(i) In general
The term "publicly offered regulated investment company" means a regulated investment company the shares of which are—
(I) continuously offered pursuant to a public offering (within the meaning of section 4 of the Securities Act of 1933, as amended (
(II) regularly traded on an established securities market, or
(III) held by or for no fewer than 500 persons at all times during the taxable year.
(ii) Secretary may reduce 500 person requirement
The Secretary may by regulation decrease the minimum shareholder requirement of clause (i)(III) in the case of regulated investment companies which experience a loss of shareholders through net redemptions of their shares.
(3) Treatment of certain other entities
Paragraph (1) shall not apply—
(A) with respect to cooperatives and real estate investment trusts, and
(B) except as provided in regulations, with respect to estates and trusts.
(d) Impairment-related work expenses
For purposes of this section, the term "impairment-related work expenses" means expenses—
(1) of a handicapped individual (as defined in section 190(b)(3)) for attendant care services at the individual's place of employment and other expenses in connection with such place of employment which are necessary for such individual to be able to work, and
(2) with respect to which a deduction is allowable under section 162 (determined without regard to this section).
(e) Determination of adjusted gross income in case of estates and trusts
For purposes of this section, the adjusted gross income of an estate or trust shall be computed in the same manner as in the case of an individual, except that—
(1) the deductions for costs which are paid or incurred in connection with the administration of the estate or trust and which would not have been incurred if the property were not held in such trust or estate, and
(2) the deductions allowable under sections 642(b), 651, and 661,
shall be treated as allowable in arriving at adjusted gross income. Under regulations, appropriate adjustments shall be made in the application of part I of subchapter J of this chapter to take into account the provisions of this section.
(f) Coordination with other limitation
This section shall be applied before the application of the dollar limitation of the second sentence of section 162(a) (relating to trade or business expenses).
(g) Suspension for taxable years 2018 through 2025
Notwithstanding subsection (a), no miscellaneous itemized deduction shall be allowed for any taxable year beginning after December 31, 2017, and before January 1, 2026.
(Added
Editorial Notes
References in Text
Section 4 of the Securities Act of 1933, referred to in subsec. (c)(2)(B)(i)(I), is classified to
Amendments
2017—Subsec. (g).
2000—Subsec. (f).
1998—Subsec. (b)(3).
1993—Subsec. (b)(6) to (13).
1989—Subsec. (c)(4).
1988—Subsec. (b)(4).
Subsec. (c).
"(1) with respect to cooperatives and real estate investment trusts, and
"(2) except as provided in regulations, with respect to estates and trusts."
Subsec. (e).
Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Effective Date of 1998 Amendment
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1989 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1001(f) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of
1-Year Delay in Treatment of Publicly Offered Regulated Investment Companies Under 2-Percent Floor
"(1)
"(2)
"(A)
"(i) continuously offered pursuant to a public offering (within the meaning of section 4 of the Securities Act of 1933, as amended (
"(ii) regularly traded on an established securities market, or
"(iii) held by or for no fewer than 500 persons at all times during the taxable year.
"(B)
§68. Overall limitation on itemized deductions
(a) General rule
In the case of an individual whose adjusted gross income exceeds the applicable amount, the amount of the itemized deductions otherwise allowable for the taxable year shall be reduced by the lesser of—
(1) 3 percent of the excess of adjusted gross income over the applicable amount, or
(2) 80 percent of the amount of the itemized deductions otherwise allowable for such taxable year.
(b) Applicable amount
(1) In general
For purposes of this section, the term "applicable amount" means—
(A) $300,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)),
(B) $275,000 in the case of a head of household (as defined in section 2(b)),
(C) $250,000 in the case of an individual who is not married and who is not a surviving spouse or head of household, and
(D) ½ the amount applicable under subparagraph (A) (after adjustment, if any, under paragraph (2)) in the case of a married individual filing a separate return.
For purposes of this paragraph, marital status shall be determined under section 7703.
(2) Inflation adjustment
In the case of any taxable year beginning in calendar years after 2013, each of the dollar amounts under subparagraphs (A), (B), and (C) of paragraph (1) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, except that section 1(f)(3)(A)(ii) shall be applied by substituting "2012" for "2016".
If any amount after adjustment under the preceding sentence is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.
(c) Exception for certain itemized deductions
For purposes of this section, the term "itemized deductions" does not include—
(1) the deduction under section 213 (relating to medical, etc. expenses),
(2) any deduction for investment interest (as defined in section 163(d)), and
(3) the deduction under section 165(a) for casualty or theft losses described in paragraph (2) or (3) of section 165(c) or for losses described in section 165(d).
(d) Coordination with other limitations
This section shall be applied after the application of any other limitation on the allowance of any itemized deduction.
(e) Exception for estates and trusts
This section shall not apply to any estate or trust.
(f) Section not to apply
This section shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
Amendments
2018—Subsec. (b)(2).
2017—Subsec. (b)(2)(B).
Subsec. (f).
2013—Subsec. (b).
"(1)
"(2)
"(A) such dollar amount, multiplied by
"(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting 'calendar year 1990' for 'calendar year 1992' in subparagraph (B) thereof."
Subsecs. (f), (g).
2001—Subsecs. (f), (g). Pub. L. 107—16 added subsecs. (f) and (g).
1998—Subsec. (c)(3).
1993—Subsec. (b)(2)(B).
Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by section 11002(d)(2) of
Effective Date of 2013 Amendment
Amendment by
Effective Date of 2001 Amendment
Effective Date of 1998 Amendment
Effective Date of 1993 Amendment
Amendment by section 13201(b)(3)(E) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1990, see section 11103(e) of
PART II—ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
Editorial Notes
Amendments
2017—
2004—
1989—
1987—
1986—
1984—
1983—
1980—
1978—
1976—
1975—
1969—
1966—
1964—
1962—
1 Section catchline amended by
[§71. Repealed. Pub. L. 115–97, title I, §11051(b)(1)(B), Dec. 22, 2017, 131 Stat. 2089 ]
Section, Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to any divorce or separation instrument (as defined in former subsec. (b)(2) of this section as in effect before Dec. 22, 2017) executed after Dec. 31, 2018, and to such instruments executed on or before Dec. 31, 2018, and modified after Dec. 31, 2018, if the modification expressly provides that the amendment made by section 11051 of
§72. Annuities; certain proceeds of endowment and life insurance contracts
(a) General rules for annuities
(1) Income inclusion
Except as otherwise provided in this chapter, gross income includes any amount received as an annuity (whether for a period certain or during one or more lives) under an annuity, endowment, or life insurance contract.
(2) Partial annuitization
If any amount is received as an annuity for a period of 10 years or more or during one or more lives under any portion of an annuity, endowment, or life insurance contract—
(A) such portion shall be treated as a separate contract for purposes of this section,
(B) for purposes of applying subsections (b), (c), and (e), the investment in the contract shall be allocated pro rata between each portion of the contract from which amounts are received as an annuity and the portion of the contract from which amounts are not received as an annuity, and
(C) a separate annuity starting date under subsection (c)(4) shall be determined with respect to each portion of the contract from which amounts are received as an annuity.
(b) Exclusion ratio
(1) In general
Gross income does not include that part of any amount received as an annuity under an annuity, endowment, or life insurance contract which bears the same ratio to such amount as the investment in the contract (as of the annuity starting date) bears to the expected return under the contract (as of such date).
(2) Exclusion limited to investment
The portion of any amount received as an annuity which is excluded from gross income under paragraph (1) shall not exceed the unrecovered investment in the contract immediately before the receipt of such amount.
(3) Deduction where annuity payments cease before entire investment recovered
(A) In general
If—
(i) after the annuity starting date, payments as an annuity under the contract cease by reason of the death of an annuitant, and
(ii) as of the date of such cessation, there is unrecovered investment in the contract,
the amount of such unrecovered investment (in excess of any amount specified in subsection (e)(5) which was not included in gross income) shall be allowed as a deduction to the annuitant for his last taxable year.
(B) Payments to other persons
In the case of any contract which provides for payments meeting the requirements of subparagraphs (B) and (C) of subsection (c)(2), the deduction under subparagraph (A) shall be allowed to the person entitled to such payments for the taxable year in which such payments are received.
(C) Net operating loss deductions provided
For purposes of section 172, a deduction allowed under this paragraph shall be treated as if it were attributable to a trade or business of the taxpayer.
(4) Unrecovered investment
For purposes of this subsection, the unrecovered investment in the contract as of any date is—
(A) the investment in the contract (determined without regard to subsection (c)(2)) as of the annuity starting date, reduced by
(B) the aggregate amount received under the contract on or after such annuity starting date and before the date as of which the determination is being made, to the extent such amount was excludable from gross income under this subtitle.
(c) Definitions
(1) Investment in the contract
For purposes of subsection (b), the investment in the contract as of the annuity starting date is—
(A) the aggregate amount of premiums or other consideration paid for the contract, minus
(B) the aggregate amount received under the contract before such date, to the extent that such amount was excludable from gross income under this subtitle or prior income tax laws.
(2) Adjustment in investment where there is refund feature
If—
(A) the expected return under the contract depends in whole or in part on the life expectancy of one or more individuals;
(B) the contract provides for payments to be made to a beneficiary (or to the estate of an annuitant) on or after the death of the annuitant or annuitants; and
(C) such payments are in the nature of a refund of the consideration paid,
then the value (computed without discount for interest) of such payments on the annuity starting date shall be subtracted from the amount determined under paragraph (1). Such value shall be computed in accordance with actuarial tables prescribed by the Secretary. For purposes of this paragraph and of subsection (e)(2)(A), the term "refund of the consideration paid" includes amounts payable after the death of an annuitant by reason of a provision in the contract for a life annuity with minimum period of payments certain, but (if part of the consideration was contributed by an employer) does not include that part of any payment to a beneficiary (or to the estate of the annuitant) which is not attributable to the consideration paid by the employee for the contract as determined under paragraph (1)(A).
(3) Expected return
For purposes of subsection (b), the expected return under the contract shall be determined as follows:
(A) Life expectancy
If the expected return under the contract, for the period on and after the annuity starting date, depends in whole or in part on the life expectancy of one or more individuals, the expected return shall be computed with reference to actuarial tables prescribed by the Secretary.
(B) Installment payments
If subparagraph (A) does not apply, the expected return is the aggregate of the amounts receivable under the contract as an annuity.
(4) Annuity starting date
For purposes of this section, the annuity starting date in the case of any contract is the first day of the first period for which an amount is received as an annuity under the contract.
(d) Special rules for qualified employer retirement plans
(1) Simplified method of taxing annuity payments
(A) In general
In the case of any amount received as an annuity under a qualified employer retirement plan—
(i) subsection (b) shall not apply, and
(ii) the investment in the contract shall be recovered as provided in this paragraph.
(B) Method of recovering investment in contract
(i) In general
Gross income shall not include so much of any monthly annuity payment under a qualified employer retirement plan as does not exceed the amount obtained by dividing—
(I) the investment in the contract (as of the annuity starting date), by
(II) the number of anticipated payments determined under the table contained in clause (iii) (or, in the case of a contract to which subsection (c)(3)(B) applies, the number of monthly annuity payments under such contract).
(ii) Certain rules made applicable
Rules similar to the rules of paragraphs (2) and (3) of subsection (b) shall apply for purposes of this paragraph.
(iii) Number of anticipated payments
If the annuity is payable over the life of a single individual, the number of anticipated payments shall be determined as follows:
| If the age of the annuitant on the annuity starting date is: | The number of anticipated payments is: |
|---|---|
| Not more than 55 | 360 |
| More than 55 but not more than 60 | 310 |
| More than 60 but not more than 65 | 260 |
| More than 65 but not more than 70 | 210 |
| More than 70 | 160. |
(iv) Number of anticipated payments where more than one life
If the annuity is payable over the lives of more than 1 individual, the number of anticipated payments shall be determined as follows:
| If the combined ages of annuitants are: | The number is: |
|---|---|
| Not more than 110 | 410 |
| More than 110 but not more than 120 | 360 |
| More than 120 but not more than 130 | 310 |
| More than 130 but not more than 140 | 260 |
| More than 140 | 210. |
(C) Adjustment for refund feature not applicable
For purposes of this paragraph, investment in the contract shall be determined under subsection (c)(1) without regard to subsection (c)(2).
(D) Special rule where lump sum paid in connection with commencement of annuity payments
If, in connection with the commencement of annuity payments under any qualified employer retirement plan, the taxpayer receives a lump-sum payment—
(i) such payment shall be taxable under subsection (e) as if received before the annuity starting date, and
(ii) the investment in the contract for purposes of this paragraph shall be determined as if such payment had been so received.
(E) Exception
This paragraph shall not apply in any case where the primary annuitant has attained age 75 on the annuity starting date unless there are fewer than 5 years of guaranteed payments under the annuity.
(F) Adjustment where annuity payments not on monthly basis
In any case where the annuity payments are not made on a monthly basis, appropriate adjustments in the application of this paragraph shall be made to take into account the period on the basis of which such payments are made.
(G) Qualified employer retirement plan
For purposes of this paragraph, the term "qualified employer retirement plan" means any plan or contract described in paragraph (1), (2), or (3) of section 4974(c).
(2) Treatment of employee contributions under defined contribution plans
For purposes of this section, employee contributions (and any income allocable thereto) under a defined contribution plan may be treated as a separate contract.
(3) Treatment of contributions to a pension-linked emergency savings account
For purposes of this section, contributions to a pension-linked emergency savings account to which section 402A(e) applies (and any income allocable thereto) may be treated as a separate contract.
(e) Amounts not received as annuities
(1) Application of subsection
(A) In general
This subsection shall apply to any amount which—
(i) is received under an annuity, endowment, or life insurance contract, and
(ii) is not received as an annuity,
if no provision of this subtitle (other than this subsection) applies with respect to such amount.
(B) Dividends
For purposes of this section, any amount received which is in the nature of a dividend or similar distribution shall be treated as an amount not received as an annuity.
(2) General rule
Any amount to which this subsection applies—
(A) if received on or after the annuity starting date, shall be included in gross income, or
(B) if received before the annuity starting date—
(i) shall be included in gross income to the extent allocable to income on the contract, and
(ii) shall not be included in gross income to the extent allocable to the investment in the contract.
(3) Allocation of amounts to income and investment
For purposes of paragraph (2)(B)—
(A) Allocation to income
Any amount to which this subsection applies shall be treated as allocable to income on the contract to the extent that such amount does not exceed the excess (if any) of—
(i) the cash value of the contract (determined without regard to any surrender charge) immediately before the amount is received, over
(ii) the investment in the contract at such time.
(B) Allocation to investment
Any amount to which this subsection applies shall be treated as allocable to investment in the contract to the extent that such amount is not allocated to income under subparagraph (A).
(4) Special rules for application of paragraph (2)(B)
For purposes of paragraph (2)(B)—
(A) Loans treated as distributions
If, during any taxable year, an individual—
(i) receives (directly or indirectly) any amount as a loan under any contract to which this subsection applies, or
(ii) assigns or pledges (or agrees to assign or pledge) any portion of the value of any such contract,
such amount or portion shall be treated as received under the contract as an amount not received as an annuity. The preceding sentence shall not apply for purposes of determining investment in the contract, except that the investment in the contract shall be increased by any amount included in gross income by reason of the amount treated as received under the preceding sentence.
(B) Treatment of policyholder dividends
Any amount described in paragraph (1)(B) shall not be included in gross income under paragraph (2)(B)(i) to the extent such amount is retained by the insurer as a premium or other consideration paid for the contract.
(C) Treatment of transfers without adequate consideration
(i) In general
If an individual who holds an annuity contract transfers it without full and adequate consideration, such individual shall be treated as receiving an amount equal to the excess of—
(I) the cash surrender value of such contract at the time of transfer, over
(II) the investment in such contract at such time,
under the contract as an amount not received as an annuity.
(ii) Exception for certain transfers between spouses or former spouses
Clause (i) shall not apply to any transfer to which section 1041(a) (relating to transfers of property between spouses or incident to divorce) applies.
(iii) Adjustment to investment in contract of transferee
If under clause (i) an amount is included in the gross income of the transferor of an annuity contract, the investment in the contract of the transferee in such contract shall be increased by the amount so included.
(5) Retention of existing rules in certain cases
(A) In general
In any case to which this paragraph applies—
(i) paragraphs (2)(B) and (4)(A) shall not apply, and
(ii) if paragraph (2)(A) does not apply,
the amount shall be included in gross income, but only to the extent it exceeds the investment in the contract.
(B) Existing contracts
This paragraph shall apply to contracts entered into before August 14, 1982. Any amount allocable to investment in the contract after August 13, 1982, shall be treated as from a contract entered into after such date.
(C) Certain life insurance and endowment contracts
Except as provided in paragraph (10) and except to the extent prescribed by the Secretary by regulations, this paragraph shall apply to any amount not received as an annuity which is received under a life insurance or endowment contract.
(D) Contracts under qualified plans
Except as provided in paragraph (8), this paragraph shall apply to any amount received—
(i) from a trust described in section 401(a) which is exempt from tax under section 501(a),
(ii) from a contract—
(I) purchased by a trust described in clause (i),
(II) purchased as part of a plan described in section 403(a),
(III) described in section 403(b), or
(IV) provided for employees of a life insurance company under a plan described in section 818(a)(3), or
(iii) from an individual retirement account or an individual retirement annuity.
Any dividend described in section 404(k) which is received by a participant or beneficiary shall, for purposes of this subparagraph, be treated as paid under a separate contract to which clause (ii)(I) applies.
(E) Full refunds, surrenders, redemptions, and maturities
This paragraph shall apply to—
(i) any amount received, whether in a single sum or otherwise, under a contract in full discharge of the obligation under the contract which is in the nature of a refund of the consideration paid for the contract, and
(ii) any amount received under a contract on its complete surrender, redemption, or maturity.
In the case of any amount to which the preceding sentence applies, the rule of paragraph (2)(A) shall not apply.
(6) Investment in the contract
For purposes of this subsection, the investment in the contract as of any date is—
(A) the aggregate amount of premiums or other consideration paid for the contract before such date, minus
(B) the aggregate amount received under the contract before such date, to the extent that such amount was excludable from gross income under this subtitle or prior income tax laws.
[(7) Repealed. Pub. L. 100–647, title I, §1011A(b)(9)(A), Nov. 10, 1988, 102 Stat. 3474 ]
(8) Extension of paragraph (2)(b) 1 to qualified plans
(A) In general
Notwithstanding any other provision of this subsection, in the case of any amount received before the annuity starting date from a trust or contract described in paragraph (5)(D), paragraph (2)(B) shall apply to such amounts.
(B) Allocation of amount received
For purposes of paragraph (2)(B), the amount allocated to the investment in the contract shall be the portion of the amount described in subparagraph (A) which bears the same ratio to such amount as the investment in the contract bears to the account balance. The determination under the preceding sentence shall be made as of the time of the distribution or at such other time as the Secretary may prescribe.
(C) Treatment of forfeitable rights
If an employee does not have a nonforfeitable right to any amount under any trust or contract to which subparagraph (A) applies, such amount shall not be treated as part of the account balance.
(D) Investment in the contract before 1987
In the case of a plan which on May 5, 1986, permitted withdrawal of any employee contributions before separation from service, subparagraph (A) shall apply only to the extent that amounts received before the annuity starting date (when increased by amounts previously received under the contract after December 31, 1986) exceed the investment in the contract as of December 31, 1986.
(9) Extension of paragraph (2)(B) to qualified tuition programs and Coverdell education savings accounts
Notwithstanding any other provision of this subsection, paragraph (2)(B) shall apply to amounts received under a qualified tuition program (as defined in section 529(b)) or under a Coverdell education savings account (as defined in section 530(b)). The rule of paragraph (8)(B) shall apply for purposes of this paragraph.
(10) Treatment of modified endowment contracts
(A) In general
Notwithstanding paragraph (5)(C), in the case of any modified endowment contract (as defined in section 7702A)—
(i) paragraphs (2)(B) and (4)(A) shall apply, and
(ii) in applying paragraph (4)(A), "any person" shall be substituted for "an individual".
(B) Treatment of certain burial contracts
Notwithstanding subparagraph (A), paragraph (4)(A) shall not apply to any assignment (or pledge) of a modified endowment contract if such assignment (or pledge) is solely to cover the payment of expenses referred to in section 7702(e)(2)(C)(iii) and if the maximum death benefit under such contract does not exceed $25,000.
(11) Special rules for certain combination contracts providing long-term care insurance
Notwithstanding paragraphs (2), (5)(C), and (10), in the case of any charge against the cash value of an annuity contract or the cash surrender value of a life insurance contract made as payment for coverage under a qualified long-term care insurance contract which is part of or a rider on such annuity or life insurance contract—
(A) the investment in the contract shall be reduced (but not below zero) by such charge, and
(B) such charge shall not be includible in gross income.
(12) Anti-abuse rules
(A) In general
For purposes of determining the amount includible in gross income under this subsection—
(i) all modified endowment contracts issued by the same company to the same policyholder during any calendar year shall be treated as 1 modified endowment contract, and
(ii) all annuity contracts issued by the same company to the same policyholder during any calendar year shall be treated as 1 annuity contract.
The preceding sentence shall not apply to any contract described in paragraph (5)(D).
(B) Regulatory authority
The Secretary may by regulations prescribe such additional rules as may be necessary or appropriate to prevent avoidance of the purposes of this subsection through serial purchases of contracts or otherwise.
(f) Special rules for computing employees' contributions
In computing, for purposes of subsection (c)(1)(A), the aggregate amount of premiums or other consideration paid for the contract, and for purposes of subsection (e)(6), the aggregate premiums or other consideration paid, amounts contributed by the employer shall be included, but only to the extent that—
(1) such amounts were includible in the gross income of the employee under this subtitle or prior income tax laws; or
(2) if such amounts had been paid directly to the employee at the time they were contributed, they would not have been includible in the gross income of the employee under the law applicable at the time of such contribution.
Paragraph (2) shall not apply to amounts which were contributed by the employer after December 31, 1962, and which would not have been includible in the gross income of the employee by reason of the application of section 911 if such amounts had been paid directly to the employee at the time of contribution. The preceding sentence shall not apply to amounts which were contributed by the employer, as determined under regulations prescribed by the Secretary, to provide pension or annuity credits, to the extent such credits are attributable to services performed before January 1, 1963, and are provided pursuant to pension or annuity plan provisions in existence on March 12, 1962, and on that date applicable to such services, or to the extent such credits are attributable to services performed as a foreign missionary (within the meaning of section 403(b)(2)(D)(iii), as in effect before the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001).
(g) Rules for transferee where transfer was for value
Where any contract (or any interest therein) is transferred (by assignment or otherwise) for a valuable consideration, to the extent that the contract (or interest therein) does not, in the hands of the transferee, have a basis which is determined by reference to the basis in the hands of the transferor, then—
(1) for purposes of this section, only the actual value of such consideration, plus the amount of the premiums and other consideration paid by the transferee after the transfer, shall be taken into account in computing the aggregate amount of the premiums or other consideration paid for the contract;
(2) for purposes of subsection (c)(1)(B), there shall be taken into account only the aggregate amount received under the contract by the transferee before the annuity starting date, to the extent that such amount was excludable from gross income under this subtitle or prior income tax laws; and
(3) the annuity starting date is the first day of the first period for which the transferee received an amount under the contract as an annuity.
For purposes of this subsection, the term "transferee" includes a beneficiary of, or the estate of, the transferee.
(h) Option to receive annuity in lieu of lump sum
If—
(1) a contract provides for payment of a lump sum in full discharge of an obligation under the contract, subject to an option to receive an annuity in lieu of such lump sum;
(2) the option is exercised within 60 days after the day on which such lump sum first became payable; and
(3) part or all of such lump sum would (but for this subsection) be includible in gross income by reason of subsection (e)(1),
then, for purposes of this subtitle, no part of such lump sum shall be considered as includible in gross income at the time such lump sum first became payable.
[(i) Repealed. Pub. L. 94–455, title XIX, §1951(b)(1)(A), Oct. 4, 1976, 90 Stat. 1836 ]
(j) Interest
Notwithstanding any other provision of this section, if any amount is held under an agreement to pay interest thereon, the interest payments shall be included in gross income.
[(k) Repealed. Pub. L. 98–369, div. A, title IV, §421(b)(1), July 18, 1984, 98 Stat. 794 ]
(l) Face-amount certificates
For purposes of this section, the term "endowment contract" includes a face-amount certificate, as defined in section 2(a)(15) of the Investment Company Act of 1940 (
(m) Special rules applicable to employee annuities and distributions under employee plans
[(1) Repealed. Pub. L. 93–406, title II, §2001(h)(2), Sept. 2, 1974, 88 Stat. 957 ]
(2) Computation of consideration paid by the employee
In computing—
(A) the aggregate amount of premiums or other consideration paid for the contract for purposes of subsection (c)(1)(A) (relating to the investment in the contract), and
(B) the aggregate premiums or other consideration paid for purposes of subsection (e)(6) (relating to certain amounts not received as an annuity),
any amount allowed as a deduction with respect to the contract under section 404 which was paid while the employee was an employee within the meaning of section 401(c)(1) shall be treated as consideration contributed by the employer, and there shall not be taken into account any portion of the premiums or other consideration for the contract paid while the employee was an owner-employee which is properly allocable (as determined under regulations prescribed by the Secretary) to the cost of life, accident, health, or other insurance.
(3) Life insurance contracts
(A) This paragraph shall apply to any life insurance contract—
(i) purchased as a part of a plan described in section 403(a), or
(ii) purchased by a trust described in section 401(a) which is exempt from tax under section 501(a) if the proceeds of such contract are payable directly or indirectly to a participant in such trust or to a beneficiary of such participant.
(B) Any contribution to a plan described in subparagraph (A)(i) or a trust described in subparagraph (A)(ii) which is allowed as a deduction under section 404, and any income of a trust described in subparagraph (A)(ii), which is determined in accordance with regulations prescribed by the Secretary to have been applied to purchase the life insurance protection under a contract described in subparagraph (A), is includible in the gross income of the participant for the taxable year when so applied.
(C) In the case of the death of an individual insured under a contract described in subparagraph (A), an amount equal to the cash surrender value of the contract immediately before the death of the insured shall be treated as a payment under such plan or a distribution by such trust, and the excess of the amount payable by reason of the death of the insured over such cash surrender value shall not be includible in gross income under this section and shall be treated as provided in section 101.
[(4) Repealed. Pub. L. 97–248, title II, §236(b)(1), Sept. 3, 1982, 96 Stat. 510 ]
(5) Penalties applicable to certain amounts received by 5-percent owners
(A) This paragraph applies to amounts which are received from a qualified trust described in section 401(a) or under a plan described in section 403(a) at any time by an individual who is, or has been, a 5-percent owner, or by a successor of such an individual, but only to the extent such amounts are determined, under regulations prescribed by the Secretary, to exceed the benefits provided for such individual under the plan formula.
(B) If a person receives an amount to which this paragraph applies, his tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of the amount so received which is includible in his gross income for such taxable year.
(C) For purposes of this paragraph, the term "5-percent owner" means any individual who, at any time during the 5 plan years preceding the plan year ending in the taxable year in which the amount is received, is a 5-percent owner (as defined in section 416(i)(1)(B)).
(6) Owner-employee defined
For purposes of this subsection, the term "owner-employee" has the meaning assigned to it by section 401(c)(3) and includes an individual for whose benefit an individual retirement account or annuity described in section 408(a) or (b) is maintained. For purposes of the preceding sentence, the term "owner-employee" shall include an employee within the meaning of section 401(c)(1).
(7) Meaning of disabled
For purposes of this section, an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. An individual shall not be considered to be disabled unless he furnishes proof of the existence thereof in such form and manner as the Secretary may require.
[(8) Repealed. Pub. L. 97–248, title II, §236(b)(1), Sept. 3, 1982, 96 Stat. 510 ]
[(9) Repealed. Pub. L. 98–369, div. A, title VII, §713(d)(1), July 18, 1984, 98 Stat. 957 ]
(10) Determination of investment in the contract in the case of qualified domestic relations orders
Under regulations prescribed by the Secretary, in the case of a distribution or payment made to an alternate payee who is the spouse or former spouse of the participant pursuant to a qualified domestic relations order (as defined in section 414(p)), the investment in the contract as of the date prescribed in such regulations shall be allocated on a pro rata basis between the present value of such distribution or payment and the present value of all other benefits payable with respect to the participant to which such order relates.
(n) Annuities under retired serviceman's family protection plan or survivor benefit plan
Subsection (b) shall not apply in the case of amounts received after December 31, 1965, as an annuity under
(o) Special rules for distributions from qualified plans to which employee made deductible contributions
(1) Treatment of contributions
For purposes of this section and sections 402 and 403, notwithstanding section 414(h), any deductible employee contribution made to a qualified employer plan or government plan shall be treated as an amount contributed by the employer which is not includible in the gross income of the employee.
[(2) Repealed. Pub. L. 100–647, title I, §1011A(c)(8), Nov. 10, 1988, 102 Stat. 3476 ]
(3) Amounts constructively received
(A) In general
For purposes of this subsection, rules similar to the rules provided by subsection (p) (other than the exception contained in paragraph (2) thereof) shall apply.
(B) Purchase of life insurance
To the extent any amount of accumulated deductible employee contributions of an employee are applied to the purchase of life insurance contracts, such amount shall be treated as distributed to the employee in the year so applied.
(4) Special rule for treatment of rollover amounts
For purposes of sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3), and 457(e)(16), the Secretary shall prescribe regulations providing for such allocations of amounts attributable to accumulated deductible employee contributions, and for such other rules, as may be necessary to insure that such accumulated deductible employee contributions do not become eligible for additional tax benefits (or freed from limitations) through the use of rollovers.
(5) Definitions and special rules
For purposes of this subsection—
(A) Deductible employee contributions
The term "deductible employee contributions" means any qualified voluntary employee contribution (as defined in section 219(e)(2)) made after December 31, 1981, in a taxable year beginning after such date and made for a taxable year beginning before January 1, 1987, and allowable as a deduction under section 219(a) for such taxable year.
(B) Accumulated deductible employee contributions
The term "accumulated deductible employee contributions" means the deductible employee contributions—
(i) increased by the amount of income and gain allocable to such contributions, and
(ii) reduced by the sum of the amount of loss and expense allocable to such contributions and the amounts distributed with respect to the employee which are attributable to such contributions (or income or gain allocable to such contributions).
(C) Qualified employer plan
The term "qualified employer plan" has the meaning given to such term by subsection (p)(3)(A)(i).
(D) Government plan
The term "government plan" has the meaning given such term by subsection (p)(3)(B).
(6) Ordering rules
Unless the plan specifies otherwise, any distribution from such plan shall not be treated as being made from the accumulated deductible employee contributions, until all other amounts to the credit of the employee have been distributed.
(p) Loans treated as distributions
For purposes of this section—
(1) Treatment as distributions
(A) Loans
If during any taxable year a participant or beneficiary receives (directly or indirectly) any amount as a loan from a qualified employer plan, such amount shall be treated as having been received by such individual as a distribution under such plan.
(B) Assignments or pledges
If during any taxable year a participant or beneficiary assigns (or agrees to assign) or pledges (or agrees to pledge) any portion of his interest in a qualified employer plan, such portion shall be treated as having been received by such individual as a loan from such plan.
(2) Exception for certain loans
(A) General rule
Paragraph (1) shall not apply to any loan to the extent that such loan (when added to the outstanding balance of all other loans from such plan whether made on, before, or after August 13, 1982), does not exceed the lesser of—
(i) $50,000, reduced by the excess (if any) of—
(I) the highest outstanding balance of loans from the plan during the 1-year period ending on the day before the date on which such loan was made, over
(II) the outstanding balance of loans from the plan on the date on which such loan was made, or
(ii) the greater of (I) one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan, or (II) $10,000.
For purposes of clause (ii), the present value of the nonforfeitable accrued benefit shall be determined without regard to any accumulated deductible employee contributions (as defined in subsection (o)(5)(B)).
(B) Requirement that loan be repayable within 5 years
(i) In general
Subparagraph (A) shall not apply to any loan unless such loan, by its terms, is required to be repaid within 5 years.
(ii) Exception for home loans
Clause (i) shall not apply to any loan used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as the principal residence of the participant.
(C) Requirement of level amortization
Except as provided in regulations, this paragraph shall not apply to any loan unless substantially level amortization of such loan (with payments not less frequently than quarterly) is required over the term of the loan.
(D) Prohibition of loans through credit cards and other similar arrangements
Subparagraph (A) shall not apply to any loan which is made through the use of any credit card or any other similar arrangement.
(E) Related employers and related plans
For purposes of this paragraph—
(i) the rules of subsections (b), (c), and (m) of section 414 shall apply, and
(ii) all plans of an employer (determined after the application of such subsections) shall be treated as 1 plan.
(3) Denial of interest deductions in certain cases
(A) In general
No deduction otherwise allowable under this chapter shall be allowed under this chapter for any interest paid or accrued on any loan to which paragraph (1) does not apply by reason of paragraph (2) during the period described in subparagraph (B).
(B) Period to which subparagraph (A) applies
For purposes of subparagraph (A), the period described in this subparagraph is the period—
(i) on or after the 1st day on which the individual to whom the loan is made is a key employee (as defined in section 416(i)), or
(ii) such loan is secured by amounts attributable to elective deferrals described in subparagraph (A) or (C) of section 402(g)(3).
(4) Qualified employer plan, etc.
For purposes of this subsection—
(A) Qualified employer plan
(i) In general
The term "qualified employer plan" means—
(I) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a),
(II) an annuity plan described in section 403(a), and
(III) a plan under which amounts are contributed by an individual's employer for an annuity contract described in section 403(b).
(ii) Special rule
The term "qualified employer plan" shall include any plan which was (or was determined to be) a qualified employer plan or a government plan.
(B) Government plan
The term "government plan" means any plan, whether or not qualified, established and maintained for its employees by the United States, by a State or political subdivision thereof, or by an agency or instrumentality of any of the foregoing.
(5) Special rules for loans, etc., from certain contracts
For purposes of this subsection, any amount received as a loan under a contract purchased under a qualified employer plan (and any assignment or pledge with respect to such a contract) shall be treated as a loan under such employer plan.
(6) Increase in limit on loans not treated as distributions
(A) In general
In the case of any loan from a qualified employer plan to a qualified individual made during the applicable period—
(i) clause (i) of paragraph (2)(A) shall be applied by substituting "$100,000" for "$50,000", and
(ii) clause (ii) of such paragraph shall be applied by substituting "the present value of the nonforfeitable accrued benefit of the employee under the plan" for "one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan".
(B) Delay of repayment
In the case of a qualified individual with respect to any qualified disaster with an outstanding loan from a qualified employer plan on or after the applicable date with respect to the qualified disaster—
(i) if the due date pursuant to subparagraph (B) or (C) of paragraph (2) for any repayment with respect to such loan occurs during the period beginning on the first day of the incident period of such qualified disaster and ending on the date which is 180 days after the last day of such incident period, such due date may be delayed for 1 year,
(ii) any subsequent repayments with respect to any such loan may be appropriately adjusted to reflect the delay in the due date under clause (i) and any interest accruing during such delay, and
(iii) in determining the 5-year period and the term of a loan under subparagraph (B) or (C) of paragraph (2), the period described in clause (i) may be disregarded.
(C) Definitions
For purposes of this paragraph—
(i) Qualified individual
The term "qualified individual" means any individual—
(I) whose principal place of abode at any time during the incident period of any qualified disaster is located in the qualified disaster area with respect to such qualified disaster, and
(II) who has sustained an economic loss by reason of such qualified disaster.
(ii) Applicable period
The applicable period with respect to any disaster is the period—
(I) beginning on the applicable date with respect to such disaster, and
(II) ending on the date that is 180 days after such applicable date.
(iii) Other terms
For purposes of this paragraph—
(I) the terms "applicable date", "qualified disaster", "qualified disaster area", and "incident period" have the meaning given such terms under subsection (t)(11), and
(II) the term "applicable period" has the meaning given such term under subsection (t)(8).
(q) 10-percent penalty for premature distributions from annuity contracts
(1) Imposition of penalty
If any taxpayer receives any amount under an annuity contract, the taxpayer's tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of such amount which is includible in gross income.
(2) Subsection not to apply to certain distributions
Paragraph (1) shall not apply to any distribution—
(A) made on or after the date on which the taxpayer attains age 59½,
(B) made on or after the death of the holder (or, where the holder is not an individual, the death of the primary annuitant (as defined in subsection (s)(6)(B))),
(C) attributable to the taxpayer's becoming disabled within the meaning of subsection (m)(7),
(D) which is a part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of such taxpayer and his designated beneficiary,
(E) from a plan, contract, account, trust, or annuity described in subsection (e)(5)(D),
(F) allocable to investment in the contract before August 14, 1982, or 2
(G) under a qualified funding asset (within the meaning of section 130(d), but without regard to whether there is a qualified assignment),
(H) to which subsection (t) applies (without regard to paragraph (2) thereof),
(I) under an immediate annuity contract (within the meaning of section 72(u)(4)), or
(J) which is purchased by an employer upon the termination of a plan described in section 401(a) or 403(a) and which is held by the employer until such time as the employee separates from service.
For purposes of subparagraph (D), periodic payments shall not fail to be treated as substantially equal merely because they are amounts received as an annuity, and such periodic payments shall be deemed to be substantially equal if they are payable over a period described in subparagraph (D) and would satisfy the requirements applicable to annuity payments under section 401(a)(9) if such requirements applied.
(3) Change in substantially equal payments
(A) In general
If—
(i) paragraph (1) does not apply to a distribution by reason of paragraph (2)(D), and
(ii) the series of payments under such paragraph are subsequently modified (other than by reason of death or disability)—
(I) before the close of the 5-year period beginning on the date of the first payment and after the taxpayer attains age 59½, or
(II) before the taxpayer attains age 59½,
the taxpayer's tax for the 1st taxable year in which such modification occurs shall be increased by an amount, determined under regulations, equal to the tax which (but for paragraph (2)(D)) would have been imposed, plus interest for the deferral period (within the meaning of subsection (t)(4)(B)).
(B) Exchanges to subsequent contracts
If—
(i) payments described in paragraph (2)(D) are being made from an annuity contract,
(ii) an exchange of all or a portion of such contract for another contract is made under section 1035, and
(iii) the aggregate distributions from the contracts involved in the exchange continue to satisfy the requirements of paragraph (2)(D) as if the exchange had not taken place,
such exchange shall not be treated as a modification under subparagraph (A)(ii), and compliance with paragraph (2)(D) shall be determined on the basis of the combined distributions described in clause (iii).
(r) Certain railroad retirement benefits treated as received under employer plans
(1) In general
Notwithstanding any other provision of law, any benefit provided under the Railroad Retirement Act of 1974 (other than a tier 1 railroad retirement benefit) shall be treated for purposes of this title as a benefit provided under an employer plan which meets the requirements of section 401(a).
(2) Tier 2 taxes treated as contributions
(A) In general
For purposes of paragraph (1)—
(i) the tier 2 portion of the tax imposed by section 3201 (relating to tax on employees) shall be treated as an employee contribution,
(ii) the tier 2 portion of the tax imposed by section 3211 (relating to tax on employee representatives) shall be treated as an employee contribution, and
(iii) the tier 2 portion of the tax imposed by section 3221 (relating to tax on employers) shall be treated as an employer contribution.
(B) Tier 2 portion
For purposes of subparagraph (A)—
(i) After 1984
With respect to compensation paid after 1984, the tier 2 portion shall be the taxes imposed by sections 3201(b), 3211(b), and 3221(b).
(ii) After September 30, 1981, and before 1985
With respect to compensation paid before 1985 for services rendered after September 30, 1981, the tier 2 portion shall be—
(I) so much of the tax imposed by section 3201 as is determined at the 2 percent rate, and
(II) so much of the taxes imposed by sections 3211 and 3221 as is determined at the 11.75 percent rate.
With respect to compensation paid for services rendered after December 31, 1983, and before 1985, subclause (I) shall be applied by substituting "2.75 percent" for "2 percent", and subclause (II) shall be applied by substituting "12.75 percent" for "11.75 percent".
(iii) Before October 1, 1981
With respect to compensation paid for services rendered during any period before October 1, 1981, the tier 2 portion shall be the excess (if any) of—
(I) the tax imposed for such period by section 3201, 3211, or 3221, as the case may be (other than any tax imposed with respect to man-hours), over
(II) the tax which would have been imposed by such section for such period had the rates of the comparable taxes imposed by
(C) Contributions not allocable to supplemental annuity or windfall benefits
For purposes of paragraph (1), no amount treated as an employee contribution under this paragraph shall be allocated to—
(i) any supplemental annuity paid under section 2(b) of the Railroad Retirement Act of 1974, or
(ii) any benefit paid under section 3(h), 4(e), or 4(h) of such Act.
(3) Tier 1 railroad retirement benefit
For purposes of paragraph (1), the term "tier 1 railroad retirement benefit" has the meaning given such term by section 86(d)(4).
(s) Required distributions where holder dies before entire interest is distributed
(1) In general
A contract shall not be treated as an annuity contract for purposes of this title unless it provides that—
(A) if any holder of such contract dies on or after the annuity starting date and before the entire interest in such contract has been distributed, the remaining portion of such interest will be distributed at least as rapidly as under the method of distributions being used as of the date of his death, and
(B) if any holder of such contract dies before the annuity starting date, the entire interest in such contract will be distributed within 5 years after the death of such holder.
(2) Exception for certain amounts payable over life of beneficiary
If—
(A) any portion of the holder's interest is payable to (or for the benefit of) a designated beneficiary,
(B) such portion will be distributed (in accordance with regulations) over the life of such designated beneficiary (or over a period not extending beyond the life expectancy of such beneficiary), and
(C) such distributions begin not later than 1 year after the date of the holder's death or such later date as the Secretary may by regulations prescribe,
then for purposes of paragraph (1), the portion referred to in subparagraph (A) shall be treated as distributed on the day on which such distributions begin.
(3) Special rule where surviving spouse beneficiary
If the designated beneficiary referred to in paragraph (2)(A) is the surviving spouse of the holder of the contract, paragraphs (1) and (2) shall be applied by treating such spouse as the holder of such contract.
(4) Designated beneficiary
For purposes of this subsection, the term "designated beneficiary" means any individual designated a beneficiary by the holder of the contract.
(5) Exception for certain annuity contracts
This subsection shall not apply to any annuity contract—
(A) which is provided—
(i) under a plan described in section 401(a) which includes a trust exempt from tax under section 501, or
(ii) under a plan described in section 403(a),
(B) which is described in section 403(b),
(C) which is an individual retirement annuity or provided under an individual retirement account or annuity, or
(D) which is a qualified funding asset (as defined in section 130(d), but without regard to whether there is a qualified assignment).
(6) Special rule where holder is corporation or other non-individual
(A) In general
For purposes of this subsection, if the holder of the contract is not an individual, the primary annuitant shall be treated as the holder of the contract.
(B) Primary annuitant
For purposes of subparagraph (A), the term "primary annuitant" means the individual, the events in the life of whom are of primary importance in affecting the timing or amount of the payout under the contract.
(7) Treatment of changes in primary annuitant where holder of contract is not an individual
For purposes of this subsection, in the case of a holder of an annuity contract which is not an individual, if there is a change in a primary annuitant (as defined in paragraph (6)(B)), such change shall be treated as the death of the holder.
(t) 10-percent additional tax on early distributions from qualified retirement plans
(1) Imposition of additional tax
If any taxpayer receives any amount from a qualified retirement plan (as defined in section 4974(c)), the taxpayer's tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of such amount which is includible in gross income.
(2) Subsection not to apply to certain distributions
Except as provided in paragraphs (3) and (4), paragraph (1) shall not apply to any of the following distributions:
(A) In general
Distributions which are—
(i) made on or after the date on which the employee attains age 59½,
(ii) made to a beneficiary (or to the estate of the employee) on or after the death of the employee,
(iii) attributable to the employee's being disabled within the meaning of subsection (m)(7),
(iv) part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of such employee and his designated beneficiary,
(v) made to an employee after separation from service after attainment of age 55,
(vi) dividends paid with respect to stock of a corporation which are described in section 404(k),
(vii) made on account of a levy under section 6331 on the qualified retirement plan,
(viii) payments under a phased retirement annuity under section 8366a(a)(5) 3 or 8412a(a)(5) of
(ix) attributable to withdrawal of net income attributable to a contribution which is distributed pursuant to section 408(d)(4).
For purposes of clause (iv), periodic payments shall not fail to be treated as substantially equal merely because they are amounts received as an annuity, and such periodic payments shall be deemed to be substantially equal if they are payable over a period described in clause (iv) and satisfy the requirements applicable to annuity payments under section 401(a)(9).
(B) Medical expenses
Distributions made to the employee (other than distributions described in subparagraph (A), (C), or (D)) to the extent such distributions do not exceed the amount allowable as a deduction under section 213 to the employee for amounts paid during the taxable year for medical care (determined without regard to whether the employee itemizes deductions for such taxable year).
(C) Payments to alternate payees pursuant to qualified domestic relations orders
Any distribution to an alternate payee pursuant to a qualified domestic relations order (within the meaning of section 414(p)(1)).
(D) Distributions to unemployed individuals for health insurance premiums
(i) In general
Distributions from an individual retirement plan to an individual after separation from employment—
(I) if such individual has received unemployment compensation for 12 consecutive weeks under any Federal or State unemployment compensation law by reason of such separation,
(II) if such distributions are made during any taxable year during which such unemployment compensation is paid or the succeeding taxable year, and
(III) to the extent such distributions do not exceed the amount paid during the taxable year for insurance described in section 213(d)(1)(D) with respect to the individual and the individual's spouse and dependents (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof).
(ii) Distributions after reemployment
Clause (i) shall not apply to any distribution made after the individual has been employed for at least 60 days after the separation from employment to which clause (i) applies.
(iii) Self-employed individuals
To the extent provided in regulations, a self-employed individual shall be treated as meeting the requirements of clause (i)(I) if, under Federal or State law, the individual would have received unemployment compensation but for the fact the individual was self-employed.
(E) Distributions from individual retirement plans for higher education expenses
Distributions to an individual from an individual retirement plan to the extent such distributions do not exceed the qualified higher education expenses (as defined in paragraph (7)) of the taxpayer for the taxable year. Distributions shall not be taken into account under the preceding sentence if such distributions are described in subparagraph (A), (C), or (D) or to the extent paragraph (1) does not apply to such distributions by reason of subparagraph (B).
(F) Distributions from certain plans for first home purchases
Distributions to an individual from an individual retirement plan which are qualified first-time homebuyer distributions (as defined in paragraph (8)). Distributions shall not be taken into account under the preceding sentence if such distributions are described in subparagraph (A), (C), (D), or (E) or to the extent paragraph (1) does not apply to such distributions by reason of subparagraph (B).
(G) Distributions from retirement plans to individuals called to active duty
(i) In general
Any qualified reservist distribution.
(ii) Amount distributed may be repaid
Any individual who receives a qualified reservist distribution may, at any time during the 2-year period beginning on the day after the end of the active duty period, make one or more contributions to an individual retirement plan of such individual in an aggregate amount not to exceed the amount of such distribution. The dollar limitations otherwise applicable to contributions to individual retirement plans shall not apply to any contribution made pursuant to the preceding sentence. No deduction shall be allowed for any contribution pursuant to this clause.
(iii) Qualified reservist distribution
For purposes of this subparagraph, the term "qualified reservist distribution" means any distribution to an individual if—
(I) such distribution is from an individual retirement plan, or from amounts attributable to employer contributions made pursuant to elective deferrals described in subparagraph (A) or (C) of section 402(g)(3) or section 501(c)(18)(D)(iii),
(II) such individual was (by reason of being a member of a reserve component (as defined in
(III) such distribution is made during the period beginning on the date of such order or call and ending at the close of the active duty period.
(iv) Application of subparagraph
This subparagraph applies to individuals ordered or called to active duty after September 11, 2001. In no event shall the 2-year period referred to in clause (ii) end before the date which is 2 years after the date of the enactment of this subparagraph.
(H) Distributions from retirement plans in case of birth of child or adoption
(i) In general
Any qualified birth or adoption distribution.
(ii) Limitation
The aggregate amount which may be treated as qualified birth or adoption distributions by any individual with respect to any birth or adoption shall not exceed $5,000.
(iii) Qualified birth or adoption distribution
For purposes of this subparagraph—
(I) In general
The term "qualified birth or adoption distribution" means any distribution from an applicable eligible retirement plan to an individual if made during the 1-year period beginning on the date on which a child of the individual is born or on which the legal adoption by the individual of an eligible adoptee is finalized.
(II) Eligible adoptee
The term "eligible adoptee" means any individual (other than a child of the taxpayer's spouse) who has not attained age 18 or is physically or mentally incapable of self-support.
(iv) Treatment of plan distributions
(I) In general
If a distribution to an individual would (without regard to clause (ii)) be a qualified birth or adoption distribution, a plan shall not be treated as failing to meet any requirement of this title merely because the plan treats the distribution as a qualified birth or adoption distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $5,000.
(II) Controlled group
For purposes of subclause (I), the term "controlled group" means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414.
(v) Amount distributed may be repaid
(I) In general
Any individual who receives a qualified birth or adoption distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an applicable eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), as the case may be.
(II) Limitation on contributions to applicable eligible retirement plans other than IRAs
The aggregate amount of contributions made by an individual under subclause (I) to any applicable eligible retirement plan which is not an individual retirement plan shall not exceed the aggregate amount of qualified birth or adoption distributions which are made from such plan to such individual. Subclause (I) shall not apply to contributions to any applicable eligible retirement plan which is not an individual retirement plan unless the individual is eligible to make contributions (other than those described in subclause (I)) to such applicable eligible retirement plan.
(III) Treatment of repayments of distributions from applicable eligible retirement plans other than IRAs
If a contribution is made under subclause (I) with respect to a qualified birth or adoption distribution from an applicable eligible retirement plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received such distribution in an eligible rollover distribution (as defined in section 402(c)(4)) and as having transferred the amount to the applicable eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
(IV) Treatment of repayments for distributions from IRAs
If a contribution is made under subclause (I) with respect to a qualified birth or adoption distribution from an individual retirement plan, then, to the extent of the amount of the contribution, such distribution shall be treated as a distribution described in section 408(d)(3) and as having been transferred to the applicable eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
(vi) Definition and special rules
For purposes of this subparagraph—
(I) Applicable eligible retirement plan
The term "applicable eligible retirement plan" means an eligible retirement plan (as defined in section 402(c)(8)(B)) other than a defined benefit plan.
(II) Exemption of distributions from trustee to trustee transfer and withholding rules
For purposes of sections 401(a)(31), 402(f), and 3405, a qualified birth or adoption distribution shall not be treated as an eligible rollover distribution.
(III) Taxpayer must include TIN
A distribution shall not be treated as a qualified birth or adoption distribution with respect to any child or eligible adoptee unless the taxpayer includes the name, age, and TIN of such child or eligible adoptee on the taxpayer's return of tax for the taxable year.
(IV) Distributions treated as meeting plan distribution requirements
Any qualified birth or adoption distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A).
(I) Distributions for certain emergency expenses
(i) In general
Any emergency personal expense distribution.
(ii) Annual limitation
Not more than 1 distribution per calendar year may be treated as an emergency personal expense distribution by any individual.
(iii) Dollar limitation
The amount which may be treated as an emergency personal expense distribution by any individual in any calendar year shall not exceed the lesser of $1,000 or an amount equal to the excess of—
(I) the individual's total nonforfeitable accrued benefit under the plan (the individual's total interest in the plan in the case of an individual retirement plan), determined as of the date of each such distribution, over
(II) $1,000.
(iv) Emergency personal expense distribution
For purposes of this subparagraph, the term "emergency personal expense distribution" means any distribution from an applicable eligible retirement plan (as defined in subparagraph (H)(vi)(I)) to an individual for purposes of meeting unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses. The administrator of an applicable eligible retirement plan may rely on an employee's written certification that the employee satisfies the conditions of the preceding sentence in determining whether any distribution is an emergency personal expense distribution. The Secretary may provide by regulations for exceptions to the rule of the preceding sentence in cases where the plan administrator has actual knowledge to the contrary of the employee's certification, and for procedures for addressing cases of employee misrepresentation.
(v) Treatment of plan distributions
If a distribution to an individual would (without regard to clause (ii) or (iii)) be an emergency personal expense distribution, a plan shall not be treated as failing to meet any requirement of this title merely because the plan treats the distribution as an emergency personal expense distribution, unless the number or the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer, determined as provided in subparagraph (H)(iv)(II)) to such individual exceeds the limitation determined under clause (ii) or (iii).
(vi) Amount distributed may be repaid
Rules similar to the rules of subparagraph (H)(v) shall apply with respect to an individual who receives a distribution to which clause (i) applies.
(vii) Limitation on subsequent distributions
If a distribution is treated as an emergency personal expense distribution in any calendar year with respect to a plan of the employee, no amount may be treated as such a distribution during the immediately following 3 calendar years with respect to such plan unless—
(I) such previous distribution is fully repaid to such plan pursuant to clause (vi), or
(II) the aggregate of the elective deferrals and employee contributions to the plan (the total amounts contributed to the plan in the case of an individual retirement plan) subsequent to such previous distribution is at least equal to the amount of such previous distribution which has not been so repaid.
(viii) Special rules
Rules similar to the rules of subclauses (II) and (IV) of subparagraph (H)(vi) shall apply to any emergency personal expense distribution.
(J) Distributions from pension-linked emergency savings account
Distributions from a pension-linked emergency savings account pursuant to section 402A(e).
(K) Distribution from retirement plan in case of domestic abuse
(i) In general
Any eligible distribution to a domestic abuse victim.
(ii) Limitation
The aggregate amount which may be treated as an eligible distribution to a domestic abuse victim by any individual shall not exceed an amount equal to the lesser of—
(I) $10,000, or
(II) 50 percent of the present value of the nonforfeitable accrued benefit of the employee under the plan.
(iii) Eligible distribution to a domestic abuse victim
For purposes of this subparagraph—
(I) In general
A distribution shall be treated as an eligible distribution to a domestic abuse victim if such distribution is from an applicable eligible retirement plan and is made to an individual during the 1-year period beginning on any date on which the individual is a victim of domestic abuse by a spouse or domestic partner.
(II) Domestic abuse
The term "domestic abuse" means physical, psychological, sexual, emotional, or economic abuse, including efforts to control, isolate, humiliate, or intimidate the victim, or to undermine the victim's ability to reason independently, including by means of abuse of the victim's child or another family member living in the household.
(iv) Treatment of plan distributions
If a distribution to an individual would (without regard to clause (ii)) be an eligible distribution to a domestic abuse victim, a plan shall not be treated as failing to meet any requirement of this title merely because the plan treats the distribution as an eligible distribution to a domestic abuse victim, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer, determined as provided in subparagraph (H)(iv)(II)) to such individual exceeds the limitation under clause (ii).
(v) Amount distributed may be repaid
Rules similar to the rules of subparagraph (H)(v) shall apply with respect to an individual who receives a distribution to which clause (i) applies.
(vi) Definition and special rules
For purposes of this subparagraph:
(I) Applicable eligible retirement plan
The term "applicable eligible retirement plan" means an eligible retirement plan (as defined in section 402(c)(8)(B)) other than a defined benefit plan or a plan to which sections 401(a)(11) and 417 apply.
(II) Exemption of distributions from trustee to trustee transfer and withholding rules
For purposes of sections 401(a)(31), 402(f), and 3405, an eligible distribution to a domestic abuse victim shall not be treated as an eligible rollover distribution.
(III) Distributions treated as meeting plan distribution requirements; self-certification
Any distribution which the employee or participant certifies as being an eligible distribution to a domestic abuse victim shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A).
(vii) Inflation adjustment
In the case of a taxable year beginning in a calendar year after 2024, the $10,000 amount in clause (ii)(I) shall be increased by an amount equal to—
(I) such dollar amount, multiplied by
(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "calendar year 2023" for "calendar year 2016" in subparagraph (A)(ii) thereof.
If any amount after adjustment under the preceding sentence is not a multiple of $100, such amount shall be rounded to the nearest multiple of $100.
(L) Terminal illness
(i) In general
Distributions which are made to the employee who is a terminally ill individual on or after the date on which such employee has been certified by a physician as having a terminal illness.
(ii) Definition
For purposes of this subparagraph, the term "terminally ill individual" has the same meaning given such term under section 101(g)(4)(A), except that "84 months" shall be substituted for "24 months".
(iii) Documentation
For purposes of this subparagraph, an employee shall not be considered to be a terminally ill individual unless such employee furnishes sufficient evidence to the plan administrator in such form and manner as the Secretary may require.
(iv) Amount distributed may be repaid
Rules similar to the rules of subparagraph (H)(v) shall apply with respect to an individual who receives a distribution to which clause (i) applies.
(M) Distributions from retirement plans in connection with federally declared disasters
Any qualified disaster recovery distribution.
(3) Limitations
(A) Certain exceptions not to apply to individual retirement plans
Subparagraphs (A)(v) and (C) of paragraph (2) shall not apply to distributions from an individual retirement plan.
(B) Periodic payments under qualified plans must begin after separation
Paragraph (2)(A)(iv) shall not apply to any amount paid from a trust described in section 401(a) which is exempt from tax under section 501(a) or from a contract described in section 72(e)(5)(D)(ii) unless the series of payments begins after the employee separates from service.
(4) Change in substantially equal payments
(A) In general
If—
(i) paragraph (1) does not apply to a distribution by reason of paragraph (2)(A)(iv), and
(ii) the series of payments under such paragraph are subsequently modified (other than by reason of death or disability or a distribution to which paragraph (10) applies)—
(I) before the close of the 5-year period beginning with the date of the first payment and after the employee attains age 59½, or
(II) before the employee attains age 59½,
the taxpayer's tax for the 1st taxable year in which such modification occurs shall be increased by an amount, determined under regulations, equal to the tax which (but for paragraph (2)(A)(iv)) would have been imposed, plus interest for the deferral period.
(B) Deferral period
For purposes of this paragraph, the term "deferral period" means the period beginning with the taxable year in which (without regard to paragraph (2)(A)(iv)) the distribution would have been includible in gross income and ending with the taxable year in which the modification described in subparagraph (A) occurs.
(C) Rollovers to subsequent plan
If—
(i) payments described in paragraph (2)(A)(iv) are being made from a qualified retirement plan,
(ii) a transfer or a rollover from such qualified retirement plan of all or a portion of the taxpayer's benefit under the plan is made to another qualified retirement plan, and
(iii) distributions from the transferor and transferee plans would in combination continue to satisfy the requirements of paragraph (2)(A)(iv) if they had been made only from the transferor plan,
such transfer or rollover shall not be treated as a modification under subparagraph (A)(ii), and compliance with paragraph (2)(A)(iv) shall be determined on the basis of the combined distributions described in clause (iii).
(5) Employee
For purposes of this subsection, the term "employee" includes any participant, and in the case of an individual retirement plan, the individual for whose benefit such plan was established.
(6) Special rules for simple retirement accounts
(A) In general
In the case of any amount received from a simple retirement account (within the meaning of section 408(p)) during the 2-year period beginning on the date such individual first participated in any qualified salary reduction arrangement maintained by the individual's employer under section 408(p)(2), paragraph (1) shall be applied by substituting "25 percent" for "10 percent".
(B) Waiver in case of plan conversion to 401(k) or 403(b)
In the case of an employee of an employer which terminates the qualified salary reduction arrangement of the employer under section 408(p) and establishes a qualified cash or deferred arrangement described in section 401(k) or purchases annuity contracts described in section 403(b), subparagraph (A) shall not apply to any amount which is paid in a rollover contribution described in section 408(d)(3) into a qualified trust under section 401(k) (but only if such contribution is subsequently subject to the rules of section 401(k)(2)(B)) or an annuity contract described in section 403(b) (but only if such contribution is subsequently subject to the rules of section 403(b)(12)) for the benefit of the employee.
(7) Qualified higher education expenses
For purposes of paragraph (2)(E)—
(A) In general
The term "qualified higher education expenses" means qualified higher education expenses (as defined in section 529(e)(3)) for education furnished to—
(i) the taxpayer,
(ii) the taxpayer's spouse, or
(iii) any child (as defined in section 152(f)(1)) or grandchild of the taxpayer or the taxpayer's spouse,
at an eligible educational institution (as defined in section 529(e)(5)).
(B) Coordination with other benefits
The amount of qualified higher education expenses for any taxable year shall be reduced as provided in section 25A(g)(2).
(8) Qualified first-time homebuyer distributions
For purposes of paragraph (2)(F)—
(A) In general
The term "qualified first-time homebuyer distribution" means any payment or distribution received by an individual to the extent such payment or distribution is used by the individual before the close of the 120th day after the day on which such payment or distribution is received to pay qualified acquisition costs with respect to a principal residence of a first-time homebuyer who is such individual, the spouse of such individual, or any child, grandchild, or ancestor of such individual or the individual's spouse.
(B) Lifetime dollar limitation
The aggregate amount of payments or distributions received by an individual which may be treated as qualified first-time homebuyer distributions for any taxable year shall not exceed the excess (if any) of—
(i) $10,000, over
(ii) the aggregate amounts treated as qualified first-time homebuyer distributions with respect to such individual for all prior taxable years.
(C) Qualified acquisition costs
For purposes of this paragraph, the term "qualified acquisition costs" means the costs of acquiring, constructing, or reconstructing a residence. Such term includes any usual or reasonable settlement, financing, or other closing costs.
(D) First-time homebuyer; other definitions
For purposes of this paragraph—
(i) First-time homebuyer
The term "first-time homebuyer" means any individual if—
(I) such individual (and if married, such individual's spouse) had no present ownership interest in a principal residence during the 2-year period ending on the date of acquisition of the principal residence to which this paragraph applies, and
(II) subsection (h) or (k) of section 1034 5 (as in effect on the day before the date of the enactment of this paragraph) did not suspend the running of any period of time specified in section 1034 5 (as so in effect) with respect to such individual on the day before the date the distribution is applied pursuant to subparagraph (A).
(ii) Principal residence
The term "principal residence" has the same meaning as when used in section 121.
(iii) Date of acquisition
The term "date of acquisition" means the date—
(I) on which a binding contract to acquire the principal residence to which subparagraph (A) applies is entered into, or
(II) on which construction or reconstruction of such a principal residence is commenced.
(E) Special rule where delay in acquisition
If any distribution from any individual retirement plan fails to meet the requirements of subparagraph (A) solely by reason of a delay or cancellation of the purchase or construction of the residence, the amount of the distribution may be contributed to an individual retirement plan as provided in section 408(d)(3)(A)(i) (determined by substituting "120th day" for "60th day" in such section), except that—
(i) section 408(d)(3)(B) shall not be applied to such contribution, and
(ii) such amount shall not be taken into account in determining whether section 408(d)(3)(B) applies to any other amount.
(F) Recontributions
(i) General rule
(I) In general
Any individual who received a qualified distribution may, during the applicable period, make one or more contributions in an aggregate amount not to exceed the amount of such qualified distribution to an eligible retirement plan (as defined in section 402(c)(8)(B)) of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3), as the case may be.
(II) Treatment of repayments
Rules similar to the rules of clauses (ii) and (iii) of paragraph (11)(C) shall apply for purposes of this subsection.
(ii) Qualified distribution
For purposes of this subparagraph, the term "qualified distribution" means any distribution—
(I) which is a qualified first-time homebuyer distribution,
(II) which was to be used to purchase or construct a principal residence in a qualified disaster area, but which was not so used on account of the qualified disaster with respect to such area, and
(III) which was received during the period beginning on the date which is 180 days before the first day of the incident period of such qualified disaster and ending on the date which is 30 days after the last day of such incident period.
(iii) Applicable period
For purposes of this subparagraph, the term "applicable period" means, in the case of a principal residence in a qualified disaster area with respect to any qualified disaster, the period beginning on the first day of the incident period of such qualified disaster and ending on the date which is 180 days after the applicable date with respect to such disaster.
(9) Special rule for rollovers to section 457 plans
For purposes of this subsection, a distribution from an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A) shall be treated as a distribution from a qualified retirement plan described in 4974(c)(1) to the extent that such distribution is attributable to an amount transferred to an eligible deferred compensation plan from a qualified retirement plan (as defined in section 4974(c)).
(10) Distributions to qualified public safety employees and private sector firefighters
(A) In general
In the case of a distribution to a qualified public safety employee from a governmental plan (within the meaning of section 414(d)) or a distribution from a plan described in clause (iii), (iv), or (vi) of section 402(c)(8)(B) to an employee who provides firefighting services, paragraph (2)(A)(v) shall be applied by substituting "age 50 or 25 years of service under the plan, whichever is earlier" for "age 55".
(B) Qualified public safety employee
For purposes of this paragraph, the term "qualified public safety employee" means—
(i) any employee of a State or political subdivision of a State who provides police protection, firefighting services, emergency medical services, or services as a corrections officer or as a forensic security employee providing for the care, custody, and control of forensic patients for any area within the jurisdiction of such State or political subdivision, or
(ii) any Federal law enforcement officer described in
(11) Qualified disaster recovery distribution
For purposes of paragraph (2)(M)—
(A) In general
Except as provided in subparagraph (B), the term "qualified disaster recovery distribution" means any distribution made—
(i) on or after the first day of the incident period of a qualified disaster and before the date that is 180 days after the applicable date with respect to such disaster, and
(ii) to an individual whose principal place of abode at any time during the incident period of such qualified disaster is located in the qualified disaster area with respect to such qualified disaster and who has sustained an economic loss by reason of such qualified disaster.
(B) Aggregate dollar limitation
(i) In general
For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as qualified disaster recovery distributions with respect to any qualified disaster in all taxable years shall not exceed $22,000.
(ii) Treatment of plan distributions
If a distribution to an individual would (without regard to clause (i)) be a qualified disaster recovery distribution, a plan shall not be treated as violating any requirement of this title merely because the plan treats such distribution as a qualified disaster recovery distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $22,000 with respect to the same qualified disaster.
(iii) Controlled group
For purposes of clause (ii), the term "controlled group" means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414.
(C) Amount distributed may be repaid
(i) In general
Any individual who receives a qualified disaster recovery distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), as the case may be.
(ii) Treatment of repayments of distributions from eligible retirement plans other than IRAs
For purposes of this title, if a contribution is made pursuant to clause (i) with respect to a qualified disaster recovery distribution from a plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received the qualified disaster recovery distribution in an eligible rollover distribution (as defined in section 402(c)(4)) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
(iii) Treatment of repayments for distributions from IRAs
For purposes of this title, if a contribution is made pursuant to clause (i) with respect to a qualified disaster recovery distribution from an individual retirement plan, then, to the extent of the amount of the contribution, the qualified disaster recovery distribution shall be treated as a distribution described in section 408(d)(3) and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
(D) Income inclusion spread over 3-year period
(i) In general
In the case of any qualified disaster recovery distribution, unless the taxpayer elects not to have this subparagraph apply for any taxable year, any amount required to be included in gross income for such taxable year shall be so included ratably over the 3-taxable year period beginning with such taxable year.
(ii) Special rule
For purposes of clause (i), rules similar to the rules of subparagraph (E) of section 408A(d)(3) shall apply.
(E) Qualified disaster
For purposes of this paragraph and paragraph (8), the term "qualified disaster" means any disaster with respect to which a major disaster has been declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act after December 27, 2020.
(F) Other definitions
For purposes of this paragraph and paragraph (8)—
(i) Qualified disaster area
(I) In general
The term "qualified disaster area" means, with respect to any qualified disaster, the area with respect to which the major disaster was declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
(II) Exceptions
Such term shall not include any area which is a qualified disaster area solely by reason of section 301 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020.
(ii) Incident period
The term "incident period" means, with respect to any qualified disaster, the period specified by the Federal Emergency Management Agency as the period during which such disaster occurred.
(iii) Applicable date
The term "applicable date" means the latest of—
(I) the date of the enactment of this paragraph,
(II) the first day of the incident period with respect to the qualified disaster, or
(III) the date of the disaster declaration with respect to the qualified disaster.
(iv) Eligible retirement plan
The term "eligible retirement plan" shall have the meaning given such term by section 402(c)(8)(B).
(G) Special rules
(i) Exemption of distributions from trustee to trustee transfer and withholding rules
For purposes of sections 401(a)(31), 402(f), and 3405, qualified disaster recovery distributions shall not be treated as eligible rollover distributions.
(ii) Qualified disaster recovery distributions treated as meeting plan distribution requirements
For purposes of this title—
(I) a qualified disaster recovery distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A), and
(II) in the case of a money purchase pension plan, a qualified disaster recovery distribution which is an in-service withdrawal shall be treated as meeting the requirements of section 401(a) applicable to distributions.
(u) Treatment of annuity contracts not held by natural persons
(1) In general
If any annuity contract is held by a person who is not a natural person—
(A) such contract shall not be treated as an annuity contract for purposes of this subtitle (other than subchapter L), and
(B) the income on the contract for any taxable year of the policyholder shall be treated as ordinary income received or accrued by the owner during such taxable year.
For purposes of this paragraph, holding by a trust or other entity as an agent for a natural person shall not be taken into account.
(2) Income on the contract
(A) In general
For purposes of paragraph (1), the term "income on the contract" means, with respect to any taxable year of the policyholder, the excess of—
(i) the sum of the net surrender value of the contract as of the close of the taxable year plus all distributions under the contract received during the taxable year or any prior taxable year, reduced by
(ii) the sum of the amount of net premiums under the contract for the taxable year and prior taxable years and amounts includible in gross income for prior taxable years with respect to such contract under this subsection.
Where necessary to prevent the avoidance of this subsection, the Secretary may substitute "fair market value of the contract" for "net surrender value of the contract" each place it appears in the preceding sentence.
(B) Net premiums
For purposes of this paragraph, the term "net premiums" means the amount of premiums paid under the contract reduced by any policyholder dividends.
(3) Exceptions
This subsection shall not apply to any annuity contract which—
(A) is acquired by the estate of a decedent by reason of the death of the decedent,
(B) is held under a plan described in section 401(a) or 403(a), under a program described in section 403(b), or under an individual retirement plan,
(C) is a qualified funding asset (as defined in section 130(d), but without regard to whether there is a qualified assignment),
(D) is purchased by an employer upon the termination of a plan described in section 401(a) or 403(a) and is held by the employer until all amounts under such contract are distributed to the employee for whom such contract was purchased or the employee's beneficiary, or
(E) is an immediate annuity.
(4) Immediate annuity
For purposes of this subsection, the term "immediate annuity" means an annuity—
(A) which is purchased with a single premium or annuity consideration,
(B) the annuity starting date (as defined in subsection (c)(4)) of which commences no later than 1 year from the date of the purchase of the annuity, and
(C) which provides for a series of substantially equal periodic payments (to be made not less frequently than annually) during the annuity period.
(v) 10-percent additional tax for taxable distributions from modified endowment contracts
(1) Imposition of additional tax
If any taxpayer receives any amount under a modified endowment contract (as defined in section 7702A), the taxpayer's tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of such amount which is includible in gross income.
(2) Subsection not to apply to certain distributions
Paragraph (1) shall not apply to any distribution—
(A) made on or after the date on which the taxpayer attains age 59½,
(B) which is attributable to the taxpayer's becoming disabled (within the meaning of subsection (m)(7)), or
(C) which is part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of such taxpayer and his beneficiary.
(w) Application of basis rules to nonresident aliens
(1) In general
Notwithstanding any other provision of this section, for purposes of determining the portion of any distribution which is includible in gross income of a distributee who is a citizen or resident of the United States, the investment in the contract shall not include any applicable nontaxable contributions or applicable nontaxable earnings.
(2) Applicable nontaxable contribution
For purposes of this subsection, the term "applicable nontaxable contribution" means any employer or employee contribution—
(A) which was made with respect to compensation—
(i) for labor or personal services performed by an employee who, at the time the labor or services were performed, was a nonresident alien for purposes of the laws of the United States in effect at such time, and
(ii) which is treated as from sources without the United States, and
(B) which was not subject to income tax (and would have been subject to income tax if paid as cash compensation when the services were rendered) under the laws of the United States or any foreign country.
(3) Applicable nontaxable earnings
For purposes of this subsection, the term "applicable nontaxable earnings" means earnings—
(A) which are paid or accrued with respect to any employer or employee contribution which was made with respect to compensation for labor or personal services performed by an employee,
(B) with respect to which the employee was at the time the earnings were paid or accrued a nonresident alien for purposes of the laws of the United States, and
(C) which were not subject to income tax under the laws of the United States or any foreign country.
(4) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this subsection, including regulations treating contributions and earnings as not subject to tax under the laws of any foreign country where appropriate to carry out the purposes of this subsection.
(x) Cross reference
For limitation on adjustments to basis of annuity contracts sold, see section 1021.
(Aug. 16, 1954, ch. 736,
Amendment of Subsection (t)(2)
"(N) Qualified long-term care distributions
"(i) In general
"Any qualified long-term care distribution to which section 401(a)(39) applies.
"(ii) Exception
"If, with respect to the plan, the individual covered by the long-term care coverage to which such distribution relates is the spouse of the employee, clause (i) shall apply only if the employee and the employee's spouse file a joint return.
"(iii) Exemption of distributions from trustee to trustee transfer and withholding rules
"For purposes of sections 401(a)(31), 402(f), and 3405, any qualified long-term care distribution described in clause (i) shall not be treated as an eligible rollover distribution.".
See 2022 Amendment note below.
Editorial Notes
References in Text
The enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001, referred to in subsec. (f), means the enactment of
The date of the enactment of the Small Business Job Protection Act of 1996, referred to in subsec. (n), is the date of enactment of
The Railroad Retirement Act of 1974, referred to in subsec. (r)(1), (2)(C)(i), (ii), is act Aug. 29, 1935, ch. 812, as amended generally by
The date of the enactment of this subparagraph, referred to in subsec. (t)(2)(G)(iv), is the date of enactment of
Section 1034 (as in effect on the day before the date of the enactment of this paragraph), referred to in subsec. (t)(8)(D)(i)(II), means
The Robert T. Stafford Disaster Relief and Emergency Assistance Act, referred to in subsec. (t)(11)(E), (F)(i)(I), is
Section 301 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, referred to in subsec. (t)(11)(F)(i)(II), is section 301 of
The date of the enactment of this paragraph, referred to in subsec. (t)(11)(F)(iii)(I), is the date of enactment of
Amendments
2022—Subsec. (d)(3).
Subsec. (p)(6).
Subsec. (q)(2).
Subsec. (q)(3).
Subsec. (t)(2)(A).
Subsec. (t)(2)(A)(ix).
Subsec. (t)(2)(H)(v)(I).
Subsec. (t)(2)(H)(vi)(IV).
Subsec. (t)(2)(I).
Subsec. (t)(2)(J).
Subsec. (t)(2)(K).
Subsec. (t)(2)(L).
Subsec. (t)(2)(M).
Subsec. (t)(2)(N).
Subsec. (t)(4)(C).
Subsec. (t)(6).
Subsec. (t)(8)(F).
Subsec. (t)(10).
Subsec. (t)(10)(A).
Subsec. (t)(10)(B)(i).
Subsec. (t)(11).
2019—Subsec. (p)(2)(D), (E).
Subsec. (t)(2)(H).
2015—Subsec. (t)(4)(A)(ii).
Subsec. (t)(10)(A).
Subsec. (t)(10)(B).
Subsec. (t)(10)(B)(ii).
2014—Subsec. (c)(4).
Subsec. (g)(3).
2012—Subsec. (t)(2)(A)(viii).
2010—Subsec. (a).
2008—Subsec. (t)(2)(G)(iv).
2006—Subsec. (e)(11), (12).
Subsec. (t)(2)(G).
Subsec. (t)(10).
2004—Subsec. (e)(9).
Subsec. (f).
Subsec. (t)(2)(D)(i)(III).
Subsec. (t)(7)(A)(iii).
Subsecs. (w), (x).
2001—Subsec. (e)(9).
Subsec. (f).
Subsec. (o)(4).
Subsec. (r)(2)(B)(i).
Subsec. (t)(9).
1998—Subsec. (e)(9).
Subsec. (n).
Subsec. (t)(2)(A)(iv).
Subsec. (t)(2)(A)(vii).
Subsec. (t)(3)(A).
Subsec. (t)(8)(E).
1997—Subsec. (d)(1)(B)(iii).
Subsec. (d)(1)(B)(iv).
Subsec. (t)(2)(E).
Subsec. (t)(2)(F).
Subsec. (t)(7).
Subsec. (t)(8).
1996—Subsec. (b)(4)(A).
Subsec. (d).
Subsec. (f).
Subsec. (m)(2)(A) to (C).
Subsec. (p)(4)(A)(ii).
"(I) shall include any plan which was (or was determined to be) a qualified employer plan or a government plan, but
"(II) shall not include a plan described in subsection (e)(7)."
Subsec. (t)(2)(B).
Subsec. (t)(2)(D).
Subsec. (t)(3)(A).
Subsec. (t)(6).
1992—Subsec. (o)(4).
1990—Subsec. (t)(2)(C), (D).
"(i) such distribution is attributable to assets which have been invested in employer securities (within the meaning of section 409(l)) at all times during the 5-plan-year period preceding the plan year in which the distribution is made, and
"(ii) at all times during such period the requirements of sections 401(a)(28) and 409 (as in effect at such times) are met with respect to such employer securities."
Subsec. (t)(3)(A).
1989—Subsec. (e)(11)(A).
Subsec. (q)(2)(B).
1988—Subsec. (d).
Subsec. (e)(4)(A).
Subsec. (e)(5)(C).
Subsec. (e)(5)(D).
Subsec. (e)(7).
Subsec. (e)(8)(A).
Subsec. (e)(9).
Subsec. (e)(10).
Subsec. (e)(11).
Subsec. (f).
Subsec. (n).
Subsec. (o)(2).
Subsec. (p)(3)(A).
Subsec. (p)(3)(B).
"(i) if paragraph (1) does not apply to such loan by reason of paragraph (2), and
"(ii) if—
"(I) such loan is made to a key employee (as defined in section 416(i)), or
"(II) such loan is secured by amounts attributable to elective 401(k) or 403(b) deferrals (as defined in section 402(g)(3))."
Subsec. (q)(2)(B).
Subsec. (q)(2)(D).
Subsec. (q)(2)(E).
Subsec. (q)(2)(G).
Subsec. (q)(2)(H).
Subsec. (q)(3)(B).
Subsec. (s)(5).
Subsec. (s)(5)(D).
Subsec. (s)(7).
Subsec. (t)(2)(A)(iv).
Subsec. (t)(2)(A)(v).
Subsec. (t)(2)(C).
"(i)
"(ii)
Subsec. (t)(3)(A).
Subsec. (u)(1)(A).
Subsec. (u)(3)(D).
Subsec. (u)(3)(E).
Subsec. (u)(4)(C).
Subsecs. (v), (w).
1986—Subsec. (b).
Subsec. (d).
Subsec. (e)(4)(C).
Subsec. (e)(5)(D).
Subsec. (e)(7)(B).
Subsec. (e)(8), (9).
Subsec. (f).
Subsec. (m)(2)(B).
Subsec. (m)(2)(C).
Subsec. (m)(5).
Subsec. (m)(5)(A).
"(i) to amounts which—
"(I) are received from a qualified trust described in section 401(a) or under a plan described in section 403(a), and
"(II) are received by a 5-percent owner before such owner attains the age of 59½ years, for any reason other than such owner becoming disabled (within the meaning of paragraph (7) of this section), and
"(ii) to amounts which are received from a qualified trust described in section 401(a) or under a plan described in section 403(a) at any time by a 5-percent owner, or by the successor of such owner, but only to the extent that such amounts are determined (under regulations prescribed by the Secretary) to exceed the benefits provided for such individual under the plan formula.
Clause (i) shall not apply to any amount received by an individual in his capacity as a policyholder of an annuity, endowment, or life insurance contract which is in the nature of a dividend or similar distribution and clause (i) shall not apply to amounts attributable to benefits accrued before January 1, 1985."
"(i) to amounts (other than any amount received by an individual in his capacity as a policyholder of an annuity, endowment, or life insurance contract which is in the nature of a dividend or similar distribution) which are received from a qualified trust described in section 401(a) or under a plan described in section 403(a) and which are received by an individual, who is, or has been, a 5-percent owner, before such individual attains the age of 59½ years, for any reason other than the individual's becoming disabled (within the meaning of paragraph (7) of this subsection), but only to the extent that such amounts are attributable to contributions paid on behalf of such individual (other than contributions made by him as a 5-percent owner) while he was a 5-percent owner, and
"(ii) to amounts which are received from a qualified trust described in section 401(a) or under a plan described in section 403(a) at any time by an individual who is, or has been, a 5-percent owner or by the successor of such individual, but only to the extent that such amounts are determined, under regulations prescribed by the Secretary, to exceed the benefits provided for such individual under the plan formula."
Subsec. (m)(5)(C).
Subsec. (m)(10).
Subsec. (o)(5).
Subsec. (p)(2)(A)(i).
Subsec. (p)(2)(B)(ii).
Subsec. (p)(2)(C), (D).
Subsec. (p)(3).
Subsec. (p)(4), (5).
Subsec. (q).
Subsec. (q)(1).
Subsec. (q)(2).
Subsec. (q)(2)(B).
Subsec. (q)(2)(D).
Subsec. (q)(2)(E).
Subsec. (q)(2)(G).
Subsec. (q)(2)(I), (J).
Subsec. (q)(3).
Subsec. (s)(1).
Subsec. (s)(5).
Subsec. (s)(6), (7).
Subsec. (t).
Subsecs. (u), (v).
1984—Subsec. (e)(5)(D).
Subsec. (e)(5)(D)(ii)(IV).
Subsec. (e)(7).
Subsec. (k).
Subsec. (m)(5).
Subsec. (m)(5)(A).
Subsec. (m)(5)(C).
Subsec. (m)(9).
Subsec. (m)(10).
Subsec. (o)(1).
Subsec. (o)(3)(A).
Subsec. (o)(4).
Subsec. (p)(2)(A).
Subsec. (p)(2)(A)(ii).
Subsec. (p)(3).
Subsec. (q)(1).
Subsecs. (s), (t).
1983—Subsec. (o)(2)(A).
Subsec. (p)(3).
Subsecs. (r), (s).
1982—Subsec. (e).
Subsec. (m)(4).
Subsec. (m)(5).
Subsec. (m)(6).
Subsec. (m)(8).
Subsec. (o)(3)(A).
Subsec. (p).
Subsec. (q).
Subsec. (r).
1981—Subsec. (m)(6).
Subsec. (m)(8).
Subsec. (m)(9).
Subsecs. (o), (p).
1976—Subsec. (c)(2), (3)(A).
Subsec. (d)(1).
Subsec. (f).
Subsec. (i).
Subsec. (m)(2), (3).
Subsec. (m)(4)(A).
Subsec. (m)(5)(A)(ii), (7).
1974—Subsec. (m)(1).
Subsec. (m)(4)(A).
Subsec. (m)(5)(A).
Subsec. (m)(5)(B).
Subsec. (m)(5)(C) to (E).
Subsec. (m)(6).
Subsec. (n).
Subsec. (o).
Subsec. (p).
1969—Subsec. (n)(1).
Subsec. (n)(4).
1966—Subsecs. (o), (p).
1965—Subsec. (m)(5)(A)(i).
Subsec. (m)(7).
Subsec. (n)(1).
Subsec. (n)(3).
1964—Subsec. (e)(3).
1962—Subsec. (d)(2).
Subsec. (f).
Subsecs. (m) to (o).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
"(1)
"(2)
"(1)
"(2)
"(3)
Effective Date of 2019 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2010 Amendment
Effective Date of 2008 Amendment
Effective Date of 2006 Amendment
"(1)
"(2)
"(1)
"(2)
"(3)
"(4)
"(5)
Effective Date of 2004 Amendment
Amendment by section 207(6), (7) of
Effective Date of 2001 Amendment
Amendment by
Amendment by
Amendment by section 641(a)(2)(C), (e)(1) of
Effective Date of 1998 Amendment
Amendment by section 6023(3), (4) of
Amendment by sections 6004(d)(3)(B) and 6005(c)(1) of
Effective Date of 1997 Amendment
Effective Date of 1996 Amendment
Effective Date of 1992 Amendment
Amendment by
Effective Date of 1989 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by sections 1011A(b)(1)(A), (B), (2), (9), (c)(1)–(8), (h), (i), and 1018(k), (t)(1)(A), (B), and (u)(8) of
Amendment by section 5012(a), (b)(1), (d) of
Effective Date of 1986 Amendment
Amendment by section 1122(c)(1) of
"(1)
"(2)
"(3)
"(A) as of March 1, 1986, the employee separated from service with the employer,
"(B) as of March 1, 1986, the accrued benefit of the employee was in pay status pursuant to a written election providing a specific schedule for the distribution of the entire accrued benefit of the employee, and
"(C) such distribution is made pursuant to such written election.
"(4)
"(5)
"(A) as of March 1, 1986, payments were being made under such contract pursuant to a written election providing a specific schedule for the distribution of the taxpayer's interest in such contract, and
"(B) such distribution is made pursuant to such written election."
Amendment by sections 1826(a), (d), 1852(a)(2), (c)(1)–(4), and 1854(b)(1) of
Effective Date of 1984 Amendment
Amendment by
Amendment by section 211(b)(1) of
"(1)
"(2)
Amendment by section 421(b)(1) of
Amendment by section 491(d)(3), (4) of
Amendment by section 521(d) of
Amendment by section 713(b)(1), (4), (c)(1)(A), (B) of
Effective Date of 1983 Amendment
"(1)
"(2)
"(3)
Amendment by title I of
Effective Date of 1982 Amendment
"(1)
"(2)
"(A)
"(B)
"(C)
"(D)
"(3)
"(A) the taxpayer after August 13, 1982, and before September 4, 1982, borrows money from a government plan (as defined in section 219(e)(4) of the Internal Revenue Code of 1986),
"(B) under the applicable State law, such loan requires the renegotiation of all outstanding prior loans made to the taxpayer under such plan, and
"(C) the renegotiation described in subparagraph (B) does not change the interest rate on, or extend the duration of, any such outstanding prior loan,
then the renegotiation described in subparagraph (B) shall not be treated as a renegotiation, extension, renewal, or revision for purposes of paragraph (1). If the renegotiation described in subparagraph (B) does not meet the requirements of subparagraph (C) solely because it extends the duration of any such outstanding prior loan, the requirements of subparagraph (C) shall be treated as met with respect to such renegotiation if, before April 1, 1983, such extension is eliminated."
"(1)
"(2)
Amendment by section 237(d) of
Effective Date of 1981 Amendment
"(1)
"(2)
Effective Date of 1976 Amendment
Amendment by section 1901(a)(12), (13) of
Effective Date of 1974 Amendment
Amendment by section 2001(e)(5) of
"(5) The amendments made by subsection (g) [amending this section and
"(6) The amendments made by subsection (h) [amending this section and
Amendment by section 2002(g)(10) of
Amendment by section 2005(c)(3) of
Amendment by section 2007(b)(2) of
Effective Date of 1969 Amendment
Amendment by
Effective Date of 1966 Amendment
Amendment by
Effective Date of 1965 Amendment
Amendment by
Amendment by
Effective Date of 1964 Amendment
Amendment by
Effective Date of 1962 Amendment
Amendment by
Savings Provision
For provisions that nothing in amendment by
Special Rules for Use of Retirement Funds
"(a)
"(1)
"(2)
"(A)
"(B)
"(C)
"(3)
"(A)
"(B)
"(C)
"(4)
"(A)
"(i) on or after January 1, 2020, and before December 31, 2020,
"(ii) to an individual—
"(I) who is diagnosed with the virus SARS–CoV–2 or with coronavirus disease 2019 (COVID–19) by a test approved by the Centers for Disease Control and Prevention,
"(II) whose spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) is diagnosed with such virus or disease by such a test, or
"(III) who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary's delegate).
"(B)
"(C)
"(5)
"(A)
"(B)
"(6)
"(A)
"(B)
"(b)
"(1)
"(A) clause (i) of section 72(p)(2)(A) of such Code shall be applied by substituting '$100,000' for '$50,000', and
"(B) clause (ii) of such section shall be applied by substituting 'the present value of the nonforfeitable accrued benefit of the employee under the plan' for 'one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan'.
"(2)
"(A) if the due date pursuant to subparagraph (B) or (C) of section 72(p)(2) of such Code for any repayment with respect to such loan occurs during the period beginning on the date of the enactment of this Act and ending on December 31, 2020, such due date shall be delayed for 1 year,
"(B) any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under subparagraph (A) and any interest accruing during such delay, and
"(C) in determining the 5-year period and the term of a loan under subparagraph (B) or (C) of section 72(p)(2) of such Code, the period described in subparagraph (A) of this paragraph shall be disregarded.
"(3)
"(c)
"(1)
"(A) such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in paragraph (2)(B)(i), and
"(B) except as provided by the Secretary of the Treasury (or the Secretary's delegate), such plan or contract shall not fail to meet the requirements of section 411(d)(6) of the Internal Revenue Code of 1986 and section 204(g) of the Employee Retirement Income Security Act of 1974 [
"(2)
"(A)
"(i) pursuant to any provision of this section, or pursuant to any regulation issued by the Secretary of the Treasury or the Secretary of Labor (or the delegate of either such Secretary) under any provision of this section, and
"(ii) on or before the last day of the first plan year beginning on or after January 1, 2025, or such later date as the Secretary of the Treasury (or the Secretary's delegate) may prescribe.
In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), clause (ii) shall be applied by substituting the date which is 2 years after the date otherwise applied under clause (ii).
"(B)
"(i) during the period—
"(I) beginning on the date that this section or the regulation described in subparagraph (A)(i) takes effect (or in the case of a plan or contract amendment not required by this section or such regulation, the effective date specified by the plan), and
"(II) ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or contract amendment is adopted),
the plan or contract is operated as if such plan or contract amendment were in effect, and
"(ii) such plan or contract amendment applies retroactively for such period."
[
Applicability of Subsection (t)
Plan Amendments Not Required Until January 1, 1998
For provisions directing that if any amendments made by subtitle D [§§1401–1465] of title I of
Plan Amendments Not Required Until January 1, 1994
For provisions directing that if any amendments made by subtitle B [§§521–523] of title V of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Definition of Terms Used in Title I of Pub. L. 110–458
"(1)
"(2)
"(3) 2006
1 So in original. Probably should be paragraph "(2)(B)".
2 So in original. The word "or" probably should not appear.
3 So in original. Probably should refer to section 8336a.
5 See References in Text note below.
§73. Services of child
(a) Treatment of amounts received
Amounts received in respect of the services of a child shall be included in his gross income and not in the gross income of the parent, even though such amounts are not received by the child.
(b) Treatment of expenditures
All expenditures by the parent or the child attributable to amounts which are includible in the gross income of the child (and not of the parent) solely by reason of subsection (a) shall be treated as paid or incurred by the child.
(c) Parent defined
For purposes of this section, the term "parent" includes an individual who is entitled to the services of a child by reason of having parental rights and duties in respect of the child.
(d) Cross reference
For assessment of tax against parent in certain cases, see section 6201(c).
(Aug. 16, 1954, ch. 736,
§74. Prizes and awards
(a) General rule
Except as otherwise provided in this section or in section 117 (relating to qualified scholarships), gross income includes amounts received as prizes and awards.
(b) Exception for certain prizes and awards transferred to charities
Gross income does not include amounts received as prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement, but only if—
(1) the recipient was selected without any action on his part to enter the contest or proceeding;
(2) the recipient is not required to render substantial future services as a condition to receiving the prize or award; and
(3) the prize or award is transferred by the payor to a governmental unit or organization described in paragraph (1) or (2) of section 170(c) pursuant to a designation made by the recipient.
(c) Exception for certain employee achievement awards
(1) In general
Gross income shall not include the value of an employee achievement award (as defined in section 274(j)) received by the taxpayer if the cost to the employer of the employee achievement award does not exceed the amount allowable as a deduction to the employer for the cost of the employee achievement award.
(2) Excess deduction award
If the cost to the employer of the employee achievement award received by the taxpayer exceeds the amount allowable as a deduction to the employer, then gross income includes the greater of—
(A) an amount equal to the portion of the cost to the employer of the award that is not allowable as a deduction to the employer (but not in excess of the value of the award), or
(B) the amount by which the value of the award exceeds the amount allowable as a deduction to the employer.
The remaining portion of the value of such award shall not be included in the gross income of the recipient.
(3) Treatment of tax-exempt employers
In the case of an employer exempt from taxation under this subtitle, any reference in this subsection to the amount allowable as a deduction to the employer shall be treated as a reference to the amount which would be allowable as a deduction to the employer if the employer were not exempt from taxation under this subtitle.
(4) Cross reference
For provisions excluding certain de minimis fringes from gross income, see section 132(e).
(d) Exception for Olympic and Paralympic medals and prizes
(1) In general
Gross income shall not include the value of any medal awarded in, or any prize money received from the United States Olympic Committee on account of, competition in the Olympic Games or Paralympic Games.
(2) Limitation based on adjusted gross income
(A) In general
Paragraph (1) shall not apply to any taxpayer for any taxable year if the adjusted gross income (determined without regard to this subsection) of such taxpayer for such taxable year exceeds $1,000,000 (half of such amount in the case of a married individual filing a separate return).
(B) Coordination with other limitations
For purposes of sections 85(c), 86, 135, 137, 219, 221, and 469, adjusted gross income shall be determined after the application of paragraph (1) and before the application of subparagraph (A).
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2021—Subsec. (d)(2)(B).
2020—Subsec. (d)(2)(B).
2017—Subsec. (d)(2)(B).
2016—Subsec. (d).
1986—Subsec. (a).
Subsec. (b).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Change of Name
References to the United States Olympic Committee deemed to refer to the United States Olympic and Paralympic Committee, see
Effective Date of 2021 Amendment
Effective Date of 2020 Amendment
Amendment by
Effective Date of 2017 Amendment
"(1)
"(2)
"(A)
"(B)
[Amendment by
Effective Date of 2016 Amendment
Effective Date of 1986 Amendment
Amendment by section 122(a)(1) of
Amendment by section 123(b)(1) of
Applicability of Certain Amendments by Public Law 99–514 in Relation to Treaty Obligations of United States
For nonapplication of amendment by section 123(b)(1) of
§75. Dealers in tax-exempt securities
(a) Adjustment for bond premium
In computing the gross income of a taxpayer who holds during the taxable year a municipal bond (as defined in subsection (b)(1)) primarily for sale to customers in the ordinary course of his trade or business—
(1) if the gross income of the taxpayer from such trade or business is computed by the use of inventories and his inventories are valued on any basis other than cost, the cost of securities sold (as defined in subsection (b)(2)) during such year shall be reduced by an amount equal to the amortizable bond premium which would be disallowed as a deduction for such year by section 171(a)(2) (relating to deduction for amortizable bond premium) if the definition in section 171(d) of the term "bond" did not exclude such municipal bond; or
(2) if the gross income of the taxpayer from such trade or business is computed without the use of inventories, or by use of inventories valued at cost, and the municipal bond is sold or otherwise disposed of during such year, the adjusted basis (computed without regard to this paragraph) of the municipal bond shall be reduced by the amount of the adjustment which would be required under section 1016(a)(5) (relating to adjustment to basis for amortizable bond premium) if the definition in section 171(d) of the term "bond" did not exclude such municipal bond.
Notwithstanding the provisions of paragraph (1), no reduction to the cost of securities sold during the taxable year shall be made in respect of any obligation described in subsection (b)(1)(A)(ii) which is held by the taxpayer at the close of the taxable year; but in the taxable year in which any such obligation is sold or otherwise disposed of, if such obligation is a municipal bond (as defined in subsection (b)(1)), the cost of securities sold during such year shall be reduced by an amount equal to the adjustment described in paragraph (2), without regard to the fact that the taxpayer values his inventories on any basis other than cost.
(b) Definitions
For purposes of subsection (a)—
(1) The term "municipal bond" means any obligation issued by a government or political subdivision thereof if the interest on such obligation is excludable from gross income; but such term does not include such an obligation if—
(A)(i) it is sold or otherwise disposed of by the taxpayer within 30 days after the date of its acquisition by him, or
(ii) its earliest maturity or call date is a date more than 5 years from the date on which it was acquired by the taxpayer; and
(B) when it is sold or otherwise disposed of by the taxpayer—
(i) in the case of a sale, the amount realized, or
(ii) in the case of any other disposition, its fair market value at the time of such disposition,
is higher than its adjusted basis (computed without regard to this section and section 1016(a)(6)).
Determinations under subparagraph (B) shall be exclusive of interest.
(2) The term "cost of securities sold" means the amount ascertained by subtracting the inventory value of the closing inventory of a taxable year from the sum of—
(A) the inventory value of the opening inventory for such year, and
(B) the cost of securities and other property purchased during such year which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1958—Subsec. (a).
Subsec. (b)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 1958 Amendment
[§76. Repealed. Pub. L. 94–455, title XIX, §1901(a)(14), Oct. 4, 1976, 90 Stat. 1765 ]
Section, act Aug. 16, 1954, ch. 736,
§77. Commodity credit loans
(a) Election to include loans in income
Amounts received as loans from the Commodity Credit Corporation shall, at the election of the taxpayer, be considered as income and shall be included in gross income for the taxable year in which received.
(b) Effect of election on adjustments for subsequent years
If a taxpayer exercises the election provided for in subsection (a) for any taxable year, then the method of computing income so adopted shall be adhered to with respect to all subsequent taxable years unless with the approval of the Secretary a change to a different method is authorized.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1976—Subsec. (b).
§78. Gross up for deemed paid foreign tax credit
If a domestic corporation chooses to have the benefits of subpart A of part III of subchapter N (relating to foreign tax credit) for any taxable year, an amount equal to the taxes deemed to be paid by such corporation under subsections (a), (b), and (d) of section 960 (determined without regard to the phrase "80 percent of" in subsection (d)(1) thereof) for such taxable year shall be treated for purposes of this title (other than sections 245 and 245A) as a dividend received by such domestic corporation from the foreign corporation.
(Added
Editorial Notes
Amendments
2017—
1976—
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Effective Date of 1976 Amendment
Amendment by
Effective Date
"(1) in respect of any distribution received by a domestic corporation after December 31, 1964, and
"(2) in respect of any distribution received by a domestic corporation before January 1, 1965, in a taxable year of such corporation beginning after December 31, 1962, but only to the extent that such distribution is made out of the accumulated profits of a foreign corporation for a taxable year (of such foreign corporation) beginning after December 31, 1962.
For purposes of paragraph (2), a distribution made by a foreign corporation out of its profits which are attributable to a distribution received from a foreign subsidiary to which [former] section 902(b) applies shall be treated as made out of the accumulated profits of a foreign corporation for a taxable year beginning before January 1, 1963, to the extent that such distribution was paid out of the accumulated profits of such foreign subsidiary for a taxable year beginning before January 1, 1963."
§79. Group-term life insurance purchased for employees
(a) General rule
There shall be included in the gross income of an employee for the taxable year an amount equal to the cost of group-term life insurance on his life provided for part or all of such year under a policy (or policies) carried directly or indirectly by his employer (or employers); but only to the extent that such cost exceeds the sum of—
(1) the cost of $50,000 of such insurance, and
(2) the amount (if any) paid by the employee toward the purchase of such insurance.
(b) Exceptions
Subsection (a) shall not apply to—
(1) the cost of group-term life insurance on the life of an individual which is provided under a policy carried directly or indirectly by an employer after such individual has terminated his employment with such employer and is disabled (within the meaning of section 72(m)(7)),
(2) the cost of any portion of the group-term life insurance on the life of an employee provided during part or all of the taxable year of the employee under which—
(A) the employer is directly or indirectly the beneficiary, or
(B) a person described in section 170(c) is the sole beneficiary,
for the entire period during such taxable year for which the employee receives such insurance, and
(3) the cost of any group-term life insurance which is provided under a contract to which section 72(m)(3) applies.
(c) Determination of cost of insurance
For purposes of this section and section 6052, the cost of group-term insurance on the life of an employee provided during any period shall be determined on the basis of uniform premiums (computed on the basis of 5-year age brackets) prescribed by regulations by the Secretary.
(d) Nondiscrimination requirements
(1) In general
In the case of a discriminatory group-term life insurance plan—
(A) subsection (a)(1) shall not apply with respect to any key employee, and
(B) the cost of group-term life insurance on the life of any key employee shall be the greater of—
(i) such cost determined without regard to subsection (c), or
(ii) such cost determined with regard to subsection (c).
(2) Discriminatory group-term life insurance plan
For purposes of this subsection, the term "discriminatory group-term life insurance plan" means any plan of an employer for providing group-term life insurance unless—
(A) the plan does not discriminate in favor of key employees as to eligibility to participate, and
(B) the type and amount of benefits available under the plan do not discriminate in favor of participants who are key employees.
(3) Nondiscriminatory eligibility classification
(A) In general
A plan does not meet requirements of subparagraph (A) of paragraph (2) unless—
(i) such plan benefits 70 percent or more of all employees of the employer,
(ii) at least 85 percent of all employees who are participants under the plan are not key employees,
(iii) such plan benefits such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of key employees, or
(iv) in the case of a plan which is part of a cafeteria plan, the requirements of section 125 are met.
(B) Exclusion of certain employees
For purposes of subparagraph (A), there may be excluded from consideration—
(i) employees who have not completed 3 years of service;
(ii) part-time or seasonal employees;
(iii) employees not included in the plan who are included in a unit of employees covered by an agreement between employee representatives and one or more employers which the Secretary finds to be a collective bargaining agreement, if the benefits provided under the plan were the subject of good faith bargaining between such employee representatives and such employer or employers; and
(iv) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).
(4) Nondiscriminatory benefits
A plan does not meet the requirements of paragraph (2)(B) unless all benefits available to participants who are key employees are available to all other participants.
(5) Special rule
A plan shall not fail to meet the requirements of paragraph (2)(B) merely because the amount of life insurance on behalf of the employees under the plan bears a uniform relationship to the total compensation or the basic or regular rate of compensation of such employees.
(6) Key employee defined
For purposes of this subsection, the term "key employee" has the meaning given to such term by paragraph (1) of section 416(i). Such term also includes any former employee if such employee when he retired or separated from service was a key employee.
(7) Exemption for church plans
(A) In general
This subsection shall not apply to a church plan maintained for church employees.
(B) Definitions
For purposes of subparagraph (A), the terms "church plan" and "church employee" have the meaning given such terms by paragraphs (1) and (3)(B) of section 414(e), respectively, except that—
(i) section 414(e) shall be applied by substituting "section 501(c)(3)" for "section 501" each place it appears, and
(ii) the term "church employee" shall not include an employee of—
(I) an organization described in section 170(b)(1)(A)(ii) above the secondary school level (other than a school for religious training),
(II) an organization described in section 170(b)(1)(A)(iii), and
(III) an organization described in section 501(c)(3), the basis of the exemption for which is substantially similar to the basis for exemption of an organization described in subclause (II).
(8) Treatment of former employees
To the extent provided in regulations, this subsection shall be applied separately with respect to former employees.
(e) Employee includes former employee
For purposes of this section, the term "employee" includes a former employee.
(f) Exception for life insurance purchased in connection with qualified transfer of excess pension assets
Subsection (b)(3) and section 72(m)(3) shall not apply in the case of any cost paid (whether directly or indirectly) with assets held in an applicable life insurance account (as defined in section 420(e)(4)) under a defined benefit plan.
(Added
Editorial Notes
Amendments
2012—Subsec. (f).
1990—Subsec. (d)(6).
1989—Subsec. (d).
Subsec. (d)(7).
1988—Subsec. (c).
1986—Subsec. (d).
Subsec. (d)(1)(B).
Subsec. (d)(6).
Subsec. (d)(8).
1984—Subsec. (b)(1).
Subsec. (d)(1).
Subsec. (e).
1982—Subsec. (d).
1976—Subsec. (c).
1965—Subsec. (b)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 2012 Amendment
Amendment by
Effective Date of 1990 Amendment
Effective Date of 1989 Amendment
Effective Date of 1988 Amendment
Effective Date of 1986 Amendment
"(1)
"(A) December 31, 1987, or
"(B) the earlier of—
"(i) the date which is 3 months after the date on which the Secretary of the Treasury or his delegate issues such regulations as are necessary to carry out the provisions of section 89 of the Internal Revenue Code of 1986 (as added by this section), or
"(ii) December 31, 1988.
Notwithstanding the preceding sentence, the amendments made by subsections (e)(1) and (i)(3)(C) [amending
"(2)
"(A) the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof after February 28, 1986), or
"(B) January 1, 1991.
A plan shall not be required to take into account employees to which the preceding sentence applies for purposes of applying section 89 of the Internal Revenue Code of 1986 (as added by this section) to employees to which the preceding sentence does not apply for any year preceding the year described in the preceding sentence.
"(3)
"(4)
"(5)
"(6)
Amendment by section 1827(c), (d) of
Effective Date of 1984 Amendment
"(1)
"(2)
"(A)
"(i) to any group-term life insurance plan of the employer in existence on January 1, 1984, or
"(ii) to any group-term life insurance plan of the employer (or a successor employer) which is a comparable successor to a plan described in clause (i),
but only with respect to an individual who attained age 55 on or before January 1, 1984, and was employed by such employer (or a predecessor employer) at any time during 1983. Such amendments also shall not apply to any employee who retired from employment on or before January 1, 1984, and who, when he retired, was covered by the plan (or a predecessor plan).
"(B)
"(C)
"(D)
Effective Date of 1982 Amendment
Effective Date of 1965 Amendment
Amendment by
Effective Date
Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990
No monies appropriated by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§80. Restoration of value of certain securities
(a) General rule
In the case of a domestic corporation subject to the tax imposed by section 11 or 801, if the value of any security (as defined in section 165(g)(2))—
(1) which became worthless by reason of the expropriation, intervention, seizure, or similar taking by the government of any foreign country, any political subdivision thereof, or any agency or instrumentality of the foregoing of property to which such security was related, and
(2) which was taken into account as a loss from the sale or exchange of a capital asset or with respect to which a deduction for a loss was allowed under section 165,
is restored in whole or in part during any taxable year by reason of any recovery of money or other property in respect of the property to which such security was related, the value so restored (to the extent that, when added to the value so restored during prior taxable years, it does not exceed the amount of the loss described in paragraph (2)) shall, except as provided in subsection (b), be included in gross income for the taxable year in which such restoration occurs.
(b) Reduction for failure to receive tax benefit
The amount otherwise includible in gross income under subsection (a) in respect of any security shall be reduced by an amount equal to the amount (if any) of the loss described in subsection (a)(2) which did not result in a reduction of the taxpayer's tax under this subtitle for any taxable year, determined under regulations prescribed by the Secretary.
(c) Character of income
For purposes of this subtitle—
(1) Except as provided in paragraph (2), the amount included in gross income under this section shall be treated as ordinary income.
(2) If the loss described in subsection (a)(2) was taken into account as a loss from the sale or exchange of a capital asset, the amount included in gross income under this section shall be treated as long-term capital gain.
(d) Treatment under foreign expropriation loss recovery provisions
This section shall not apply to any recovery of a foreign expropriation loss to which section 1351 applies.
(Added
Editorial Notes
Amendments
1984—Subsec. (a).
1976—Subsec. (b).
Subsec. (c)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by section 1901(b)(3)(K) of
Effective Date
[§81. Repealed. Pub. L. 100–203, title X, §10201(b)(1), Dec. 22, 1987, 101 Stat. 1330–387 ]
Section, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 1987, see section 10201(c)(1) of
§82. Reimbursement of moving expenses
Except as provided in section 132(a)(6), there shall be included in gross income (as compensation for services) any amount received or accrued, directly or indirectly, by an individual as a payment for or reimbursement of expenses of moving from one residence to another residence which is attributable to employment or self-employment.
(Added
Editorial Notes
Amendments
2018—
1993—
Statutory Notes and Related Subsidiaries
Effective Date of 1993 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after December 31, 1969, except that it does not apply to moving expenses paid or incurred before July 1, 1970, in connection with the commencement of work by the taxpayer as an employee at a new principal place of work of which the taxpayer had been notified by his employer on or before December 19, 1969, see section 231(d) of
Moving Expenses of Members of the Uniformed Services
Withholding, reporting, inclusion within adjusted gross income, and deduction for reimbursement for moving expenses of members of the uniformed services, see section 2 of
§83. Property transferred in connection with performance of services
(a) General rule
If, in connection with the performance of services, property is transferred to any person other than the person for whom such services are performed, the excess of—
(1) the fair market value of such property (determined without regard to any restriction other than a restriction which by its terms will never lapse) at the first time the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, over
(2) the amount (if any) paid for such property,
shall be included in the gross income of the person who performed such services in the first taxable year in which the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable. The preceding sentence shall not apply if such person sells or otherwise disposes of such property in an arm's length transaction before his rights in such property become transferable or not subject to a substantial risk of forfeiture.
(b) Election to include in gross income in year of transfer
(1) In general
Any person who performs services in connection with which property is transferred to any person may elect to include in his gross income for the taxable year in which such property is transferred, the excess of—
(A) the fair market value of such property at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse), over
(B) the amount (if any) paid for such property.
If such election is made, subsection (a) shall not apply with respect to the transfer of such property, and if such property is subsequently forfeited, no deduction shall be allowed in respect of such forfeiture.
(2) Election
An election under paragraph (1) with respect to any transfer of property shall be made in such manner as the Secretary prescribes and shall be made not later than 30 days after the date of such transfer. Such election may not be revoked except with the consent of the Secretary.
(c) Special rules
For purposes of this section—
(1) Substantial risk of forfeiture
The rights of a person in property are subject to a substantial risk of forfeiture if such person's rights to full enjoyment of such property are conditioned upon the future performance of substantial services by any individual.
(2) Transferability of property
The rights of a person in property are transferable only if the rights in such property of any transferee are not subject to a substantial risk of forfeiture.
(3) Sales which may give rise to suit under section 16(b) of the Securities Exchange Act of 1934
So long as the sale of property at a profit could subject a person to suit under section 16(b) of the Securities Exchange Act of 1934, such person's rights in such property are—
(A) subject to a substantial risk of forfeiture, and
(B) not transferable.
(4) For purposes of determining an individual's basis in property transferred in connection with the performance of services, rules similar to the rules of section 72(w) shall apply.
(d) Certain restrictions which will never lapse
(1) Valuation
In the case of property subject to a restriction which by its terms will never lapse, and which allows the transferee to sell such property only at a price determined under a formula, the price so determined shall be deemed to be the fair market value of the property unless established to the contrary by the Secretary, and the burden of proof shall be on the Secretary with respect to such value.
(2) Cancellation
If, in the case of property subject to a restriction which by its terms will never lapse, the restriction is canceled, then, unless the taxpayer establishes—
(A) that such cancellation was not compensatory, and
(B) that the person, if any, who would be allowed a deduction if the cancellation were treated as compensatory, will treat the transaction as not compensatory, as evidenced in such manner as the Secretary shall prescribe by regulations,
the excess of the fair market value of the property (computed without regard to the restrictions) at the time of cancellation over the sum of—
(C) the fair market value of such property (computed by taking the restriction into account) immediately before the cancellation, and
(D) the amount, if any, paid for the cancellation,
shall be treated as compensation for the taxable year in which such cancellation occurs.
(e) Applicability of section
This section shall not apply to—
(1) a transaction to which section 421 applies,
(2) a transfer to or from a trust described in section 401(a) or a transfer under an annuity plan which meets the requirements of section 404(a)(2),
(3) the transfer of an option without a readily ascertainable fair market value,
(4) the transfer of property pursuant to the exercise of an option with a readily ascertainable fair market value at the date of grant, or
(5) group-term life insurance to which section 79 applies.
(f) Holding period
In determining the period for which the taxpayer has held property to which subsection (a) applies, there shall be included only the period beginning at the first time his rights in such property are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier.
(g) Certain exchanges
If property to which subsection (a) applies is exchanged for property subject to restrictions and conditions substantially similar to those to which the property given in such exchange was subject, and if section 354, 355, 356, or 1036 (or so much of section 1031 as relates to section 1036) applied to such exchange, or if such exchange was pursuant to the exercise of a conversion privilege—
(1) such exchange shall be disregarded for purposes of subsection (a), and
(2) the property received shall be treated as property to which subsection (a) applies.
(h) Deduction by employer
In the case of a transfer of property to which this section applies or a cancellation of a restriction described in subsection (d), there shall be allowed as a deduction under section 162, to the person for whom were performed the services in connection with which such property was transferred, an amount equal to the amount included under subsection (a), (b), or (d)(2) in the gross income of the person who performed such services. Such deduction shall be allowed for the taxable year of such person in which or with which ends the taxable year in which such amount is included in the gross income of the person who performed such services.
(i) Qualified equity grants
(1) In general
For purposes of this subtitle—
(A) Timing of inclusion
If qualified stock is transferred to a qualified employee who makes an election with respect to such stock under this subsection, subsection (a) shall be applied by including the amount determined under such subsection with respect to such stock in income of the employee in the taxable year determined under subparagraph (B) in lieu of the taxable year described in subsection (a).
(B) Taxable year determined
The taxable year determined under this subparagraph is the taxable year of the employee which includes the earliest of—
(i) the first date such qualified stock becomes transferable (including, solely for purposes of this clause, becoming transferable to the employer),
(ii) the date the employee first becomes an excluded employee,
(iii) the first date on which any stock of the corporation which issued the qualified stock becomes readily tradable on an established securities market (as determined by the Secretary, but not including any market unless such market is recognized as an established securities market by the Secretary for purposes of a provision of this title other than this subsection),
(iv) the date that is 5 years after the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, or
(v) the date on which the employee revokes (at such time and in such manner as the Secretary provides) the election under this subsection with respect to such stock.
(2) Qualified stock
(A) In general
For purposes of this subsection, the term "qualified stock" means, with respect to any qualified employee, any stock in a corporation which is the employer of such employee, if—
(i) such stock is received—
(I) in connection with the exercise of an option, or
(II) in settlement of a restricted stock unit, and
(ii) such option or restricted stock unit was granted by the corporation—
(I) in connection with the performance of services as an employee, and
(II) during a calendar year in which such corporation was an eligible corporation.
(B) Limitation
The term "qualified stock" shall not include any stock if the employee may sell such stock to, or otherwise receive cash in lieu of stock from, the corporation at the time that the rights of the employee in such stock first become transferable or not subject to a substantial risk of forfeiture.
(C) Eligible corporation
For purposes of subparagraph (A)(ii)(II)—
(i) In general
The term "eligible corporation" means, with respect to any calendar year, any corporation if—
(I) no stock of such corporation (or any predecessor of such corporation) is readily tradable on an established securities market (as determined under paragraph (1)(B)(iii)) during any preceding calendar year, and
(II) such corporation has a written plan under which, in such calendar year, not less than 80 percent of all employees who provide services to such corporation in the United States (or any possession of the United States) are granted stock options, or are granted restricted stock units, with the same rights and privileges to receive qualified stock.
(ii) Same rights and privileges
For purposes of clause (i)(II)—
(I) except as provided in subclauses (II) and (III), the determination of rights and privileges with respect to stock shall be made in a similar manner as under section 423(b)(5),
(II) employees shall not fail to be treated as having the same rights and privileges to receive qualified stock solely because the number of shares available to all employees is not equal in amount, so long as the number of shares available to each employee is more than a de minimis amount, and
(III) rights and privileges with respect to the exercise of an option shall not be treated as the same as rights and privileges with respect to the settlement of a restricted stock unit.
(iii) Employee
For purposes of clause (i)(II), the term "employee" shall not include any employee described in section 4980E(d)(4) or any excluded employee.
(iv) Special rule for calendar years before 2018
In the case of any calendar year beginning before January 1, 2018, clause (i)(II) shall be applied without regard to whether the rights and privileges with respect to the qualified stock are the same.
(3) Qualified employee; excluded employee
For purposes of this subsection—
(A) In general
The term "qualified employee" means any individual who—
(i) is not an excluded employee, and
(ii) agrees in the election made under this subsection to meet such requirements as are determined by the Secretary to be necessary to ensure that the withholding requirements of the corporation under
(B) Excluded employee
The term "excluded employee" means, with respect to any corporation, any individual—
(i) who is a 1-percent owner (within the meaning of section 416(i)(1)(B)(ii)) at any time during the calendar year or who was such a 1 percent owner at any time during the 10 preceding calendar years,
(ii) who is or has been at any prior time—
(I) the chief executive officer of such corporation or an individual acting in such a capacity, or
(II) the chief financial officer of such corporation or an individual acting in such a capacity,
(iii) who bears a relationship described in section 318(a)(1) to any individual described in subclause (I) or (II) of clause (ii), or
(iv) who is one of the 4 highest compensated officers of such corporation for the taxable year, or was one of the 4 highest compensated officers of such corporation for any of the 10 preceding taxable years, determined with respect to each such taxable year on the basis of the shareholder disclosure rules for compensation under the Securities Exchange Act of 1934 (as if such rules applied to such corporation).
(4) Election
(A) Time for making election
An election with respect to qualified stock shall be made under this subsection no later than 30 days after the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, and shall be made in a manner similar to the manner in which an election is made under subsection (b).
(B) Limitations
No election may be made under this section with respect to any qualified stock if—
(i) the qualified employee has made an election under subsection (b) with respect to such qualified stock,
(ii) any stock of the corporation which issued the qualified stock is readily tradable on an established securities market (as determined under paragraph (1)(B)(iii)) at any time before the election is made, or
(iii) such corporation purchased any of its outstanding stock in the calendar year preceding the calendar year which includes the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, unless—
(I) not less than 25 percent of the total dollar amount of the stock so purchased is deferral stock, and
(II) the determination of which individuals from whom deferral stock is purchased is made on a reasonable basis.
(C) Definitions and special rules related to limitation on stock redemptions
(i) Deferral stock
For purposes of this paragraph, the term "deferral stock" means stock with respect to which an election is in effect under this subsection.
(ii) Deferral stock with respect to any individual not taken into account if individual holds deferral stock with longer deferral period
Stock purchased by a corporation from any individual shall not be treated as deferral stock for purposes of subparagraph (B)(iii) if such individual (immediately after such purchase) holds any deferral stock with respect to which an election has been in effect under this subsection for a longer period than the election with respect to the stock so purchased.
(iii) Purchase of all outstanding deferral stock
The requirements of subclauses (I) and (II) of subparagraph (B)(iii) shall be treated as met if the stock so purchased includes all of the corporation's outstanding deferral stock.
(iv) Reporting
Any corporation which has outstanding deferral stock as of the beginning of any calendar year and which purchases any of its outstanding stock during such calendar year shall include on its return of tax for the taxable year in which, or with which, such calendar year ends the total dollar amount of its outstanding stock so purchased during such calendar year and such other information as the Secretary requires for purposes of administering this paragraph.
(5) Controlled groups
For purposes of this subsection, all persons treated as a single employer under section 414(b) shall be treated as 1 corporation.
(6) Notice requirement
Any corporation which transfers qualified stock to a qualified employee shall, at the time that (or a reasonable period before) an amount attributable to such stock would (but for this subsection) first be includible in the gross income of such employee—
(A) certify to such employee that such stock is qualified stock, and
(B) notify such employee—
(i) that the employee may be eligible to elect to defer income on such stock under this subsection, and
(ii) that, if the employee makes such an election—
(I) the amount of income recognized at the end of the deferral period will be based on the value of the stock at the time at which the rights of the employee in such stock first become transferable or not subject to substantial risk of forfeiture, notwithstanding whether the value of the stock has declined during the deferral period,
(II) the amount of such income recognized at the end of the deferral period will be subject to withholding under section 3401(i) at the rate determined under section 3402(t), and
(III) the responsibilities of the employee (as determined by the Secretary under paragraph (3)(A)(ii)) with respect to such withholding.
(7) Restricted stock units
This section (other than this subsection), including any election under subsection (b), shall not apply to restricted stock units.
(Added
Editorial Notes
References in Text
The Securities Exchange Act of 1934, referred to in subsecs. (c)(3) and (i)(3)(B)(iv), is act June 6, 1934, ch. 404,
Amendments
2017—Subsec. (i).
2004—Subsec. (c)(4).
1990—Subsec. (i).
"(1) pursuant to a binding written contract entered into before April 22, 1969,
"(2) upon the exercise of an option granted before April 22, 1969,
"(3) before May 1, 1970, pursuant to a written plan adopted and approved before July 1, 1969,
"(4) before January 1, 1973, upon the exercise of an option granted pursuant to a binding written contract entered into before April 22, 1969, between a corporation and the transferor requiring the transferor to grant options to employees of such corporation (or a subsidiary of such corporation) to purchase a determinable number of shares of stock of such corporation, but only if the transferee was an employee of such corporation (or a subsidiary of such corporation) on or before April 22, 1969, or
"(5) in exchange for (or pursuant to the exercise of a conversion privilege contained in) property transferred before July 1, 1969, or for property to which this section does not apply (by reason of paragraphs (1), (2), (3), or (4)), if section 354, 355, 356, or 1036 (or so much of section 1031 as relates to section 1036) applies, or if gain or loss is not otherwise required to be recognized upon the exercise of such conversion privilege, and if the property received in such exchange is subject to restrictions and conditions substantially similar to those to which the property given in such exchange was subject."
1986—Subsec. (e)(5).
1984—Subsec. (e)(5).
1983—Subsec. (c)(3).
1981—Subsec. (c)(3).
1976—Subsec. (b)(2).
Subsec. (d)(1), (2)(B).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
"(1)
"(2)
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1981 Amendment
Effective Date of 1976 Amendment
Amendment by section 1901(a)(15) of
Effective Date
Savings Provision
For provisions that nothing in amendment by
Transition Rule
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Application of Amendments Made by Section 252 of Pub. L. 97–34
"(1) Notwithstanding subsection (c) of section 252 of the Economic Recovery Tax Act of 1981 [section 252(c) of
"(A) such transfer occurred in November or December of 1973 and was pursuant to the exercise of an option granted in November or December of 1971,
"(B) in December 1973 the corporation granting the option was acquired by another corporation in a transaction qualifying as a reorganization under section 368 of the Internal Revenue Code of 1954 [now 1986],
"(C) the fair market value (as of July 1, 1974) of the stock received by such person in the reorganization in exchange for the stock transferred to him pursuant to the exercise of such option was less than 50 percent of the fair market value of the stock so received (as of December 4, 1973),
"(D) in 1975 or 1976 such person sold substantially all of the stock received in such reorganization, and
"(E) such person makes an election under this section at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe.
"(2)
"(3)
"(A)
"(B)
Time for Making Certain Section 83(b) Elections
"(1) the amount paid for such property was not less than its fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse), and
"(2) the election is consented to by the person transferring such property.
The election shall contain that information required by the Secretary of the Treasury or his delegate for elections permitted by such section 83(b). The period for assessing any tax attributable to a transfer of property which is the subject of an election made pursuant to this section shall not expire before the date which is 3 years after the date such election was made."
Property Subject to Transfer Restrictions To Comply With "Pooling-of-Interests Accounting" Rules
§84. Transfer of appreciated property to political organizations
(a) General rule
If—
(1) any person transfers property to a political organization, and
(2) the fair market value of such property exceeds its adjusted basis,
then for purposes of this chapter the transferor shall be treated as having sold such property to the political organization on the date of the transfer, and the transferor shall be treated as having realized an amount equal to the fair market value of such property on such date.
(b) Basis of property
In the case of a transfer of property to a political organization to which subsection (a) applies, the basis of such property in the hands of the political organization shall be the same as it would be in the hands of the transferor, increased by the amount of gain recognized to the transferor by reason of such transfer.
(c) Political organization defined
For purposes of this section, the term "political organization" has the meaning given to such term by section 527(e)(1).
(Added
Editorial Notes
Amendments
2018—
Statutory Notes and Related Subsidiaries
Effective Date
Nonrecognition of Gain or Loss Where Organization Sold Contributed Property Before August 2, 1973
§85. Unemployment compensation
(a) General rule
In the case of an individual, gross income includes unemployment compensation.
(b) Unemployment compensation defined
For purposes of this section, the term "unemployment compensation" means any amount received under a law of the United States or of a State which is in the nature of unemployment compensation.
(c) Special rule for 2020
(1) In general
In the case of any taxable year beginning in 2020, if the adjusted gross income of the taxpayer for such taxable year is less than $150,000, the gross income of such taxpayer shall not include so much of the unemployment compensation received by such taxpayer (or, in the case of a joint return, received by each spouse) as does not exceed $10,200.
(2) Application
For purposes of paragraph (1), the adjusted gross income of the taxpayer shall be determined—
(A) after application of sections 86, 135, 137, 219, 221, 222, and 469, and
(B) without regard to this section.
(Added
Editorial Notes
Amendments
2021—Subsec. (c).
2014—Subsec. (c).
2009—Subsec. (c).
1986—Subsec. (a).
"(1) one-half of the amount of the excess of such sum over the base amount, or
"(2) the amount of the unemployment compensation."
Subsecs. (b), (c).
"(1) except as provided in paragraphs (2) and (3), $12,000,
"(2) $18,000, in the case of a joint return under section 6013, or
"(3) zero, in the case of a taxpayer who—
"(A) is married at the close of the taxable year (within the meaning of section 143) but does not file a joint return for such year, and
"(B) does not live apart from his spouse at all times during the taxable year."
1983—Subsec. (a).
1982—Subsec. (b)(1).
Subsec. (b)(2).
1981—Subsec. (a).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Amendment by
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2009 Amendment
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1983 Amendment
Amendment by section 121(f)(1) of
Amendment by section 122(c)(2) of
Effective Date of 1982 Amendment
"(1)
"(2)
"(3)
"(A) the amendments made by this section shall be applied by taking into account the entire amount of unemployment compensation received during such taxable year, but
"(B) the increase in gross income for such taxable year as a result of such amendments shall not exceed the amount of unemployment compensation paid after December 31, 1981.
"(4)
Effective Date of 1981 Amendment
Amendment by
Effective Date
Waiver of Statute of Limitations
§86. Social security and tier 1 railroad retirement benefits
(a) In general
(1) In general
Except as provided in paragraph (2), gross income for the taxable year of any taxpayer described in subsection (b) (notwithstanding section 207 of the Social Security Act) includes social security benefits in an amount equal to the lesser of—
(A) one-half of the social security benefits received during the taxable year, or
(B) one-half of the excess described in subsection (b)(1).
(2) Additional amount
In the case of a taxpayer with respect to whom the amount determined under subsection (b)(1)(A) exceeds the adjusted base amount, the amount included in gross income under this section shall be equal to the lesser of—
(A) the sum of—
(i) 85 percent of such excess, plus
(ii) the lesser of the amount determined under paragraph (1) or an amount equal to one-half of the difference between the adjusted base amount and the base amount of the taxpayer, or
(B) 85 percent of the social security benefits received during the taxable year.
(b) Taxpayers to whom subsection (a) applies
(1) In general
A taxpayer is described in this subsection if—
(A) the sum of—
(i) the modified adjusted gross income of the taxpayer for the taxable year, plus
(ii) one-half of the social security benefits received during the taxable year, exceeds
(B) the base amount.
(2) Modified adjusted gross income
For purposes of this subsection, the term "modified adjusted gross income" means adjusted gross income—
(A) determined without regard to this section and sections 85(c), 135, 137, 221, 911, 931, and 933, and
(B) increased by the amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.
(c) Base amount and adjusted base amount
For purposes of this section—
(1) Base amount
The term "base amount" means—
(A) except as otherwise provided in this paragraph, $25,000,
(B) $32,000 in the case of a joint return, and
(C) zero in the case of a taxpayer who—
(i) is married as of the close of the taxable year (within the meaning of section 7703) but does not file a joint return for such year, and
(ii) does not live apart from his spouse at all times during the taxable year.
(2) Adjusted base amount
The term "adjusted base amount" means—
(A) except as otherwise provided in this paragraph, $34,000,
(B) $44,000 in the case of a joint return, and
(C) zero in the case of a taxpayer described in paragraph (1)(C).
(d) Social security benefit
(1) In general
For purposes of this section, the term "social security benefit" means any amount received by the taxpayer by reason of entitlement to—
(A) a monthly benefit under title II of the Social Security Act, or
(B) a tier 1 railroad retirement benefit.
(2) Adjustment for repayments during year
(A) In general
For purposes of this section, the amount of social security benefits received during any taxable year shall be reduced by any repayment made by the taxpayer during the taxable year of a social security benefit previously received by the taxpayer (whether or not such benefit was received during the taxable year).
(B) Denial of deduction
If (but for this subparagraph) any portion of the repayments referred to in subparagraph (A) would have been allowable as a deduction for the taxable year under section 165, such portion shall be allowable as a deduction only to the extent it exceeds the social security benefits received by the taxpayer during the taxable year (and not repaid during such taxable year).
(3) Workmen's compensation benefits substituted for social security benefits
For purposes of this section, if, by reason of section 224 of the Social Security Act (or by reason of section 3(a)(1) of the Railroad Retirement Act of 1974), any social security benefit is reduced by reason of the receipt of a benefit under a workmen's compensation act, the term "social security benefit" includes that portion of such benefit received under the workmen's compensation act which equals such reduction.
(4) Tier 1 railroad retirement benefit
For purposes of paragraph (1), the term "tier 1 railroad retirement benefit" means—
(A) the amount of the annuity under the Railroad Retirement Act of 1974 equal to the amount of the benefit to which the taxpayer would have been entitled under the Social Security Act if all of the service after December 31, 1936, of the employee (on whose employment record the annuity is being paid) had been included in the term "employment" as defined in the Social Security Act, and
(B) a monthly annuity amount under section 3(f)(3) of the Railroad Retirement Act of 1974.
(5) Effect of early delivery of benefit checks
For purposes of subsection (a), in any case where section 708 of the Social Security Act causes social security benefit checks to be delivered before the end of the calendar month for which they are issued, the benefits involved shall be deemed to have been received in the succeeding calendar month.
(e) Limitation on amount included where taxpayer receives lump-sum payment
(1) Limitation
If—
(A) any portion of a lump-sum payment of social security benefits received during the taxable year is attributable to prior taxable years, and
(B) the taxpayer makes an election under this subsection for the taxable year,
then the amount included in gross income under this section for the taxable year by reason of the receipt of such portion shall not exceed the sum of the increases in gross income under this chapter for prior taxable years which would result solely from taking into account such portion in the taxable years to which it is attributable.
(2) Special rules
(A) Year to which benefit attributable
For purposes of this subsection, a social security benefit is attributable to a taxable year if the generally applicable payment date for such benefit occurred during such taxable year.
(B) Election
An election under this subsection shall be made at such time and in such manner as the Secretary shall by regulations prescribe. Such election, once made, may be revoked only with the consent of the Secretary.
(f) Treatment as pension or annuity for certain purposes
For purposes of—
(1) section 22(c)(3)(A) (relating to reduction for amounts received as pension or annuity),
(2) section 32(c)(2) (defining earned income),
(3) section 219(f)(1) (defining compensation), and
(4) section 911(b)(1) (defining foreign earned income),
any social security benefit shall be treated as an amount received as a pension or annuity.
(Added and amended
Editorial Notes
References in Text
The Social Security Act, referred to in subsecs. (a)(1) and (d)(1)(A), (3), (4)(A), (5), is act Aug. 14, 1935, ch. 531,
The Railroad Retirement Act of 1974, referred to in subsec. (d)(3), (4), is act Aug. 29, 1935, ch. 812, as amended generally by
Prior Provisions
A prior section 86 was renumbered
Amendments
2021—Subsec. (b)(2)(A).
2020—Subsec. (b)(2)(A).
2017—Subsec. (b)(2)(A).
2004—Subsec. (b)(2)(A).
2001—Subsec. (b)(2)(A).
1998—Subsec. (b)(2)(A).
1996—Subsec. (b)(2).
Subsec. (b)(2)(A).
1994—Subsec. (d)(1).
1993—Subsec. (a).
Subsec. (c).
"(1) except as otherwise provided in this subsection, $25,000,
"(2) $32,000, in the case of a joint return, and
"(3) zero, in the case of a taxpayer who—
"(A) is married at the close of the taxable year (within the meaning of section 7703) but does not file a joint return for such year, and
"(B) does not live apart from his spouse at all times during the taxable year."
1988—Subsec. (b)(2)(A).
Subsec. (f)(4), (5).
1986—Subsec. (b)(2)(A).
Subsec. (c)(3)(A).
Subsec. (d)(4).
Subsec. (d)(5).
Subsec. (f)(1).
1984—Subsec. (f)(1).
Subsec. (f)(2)–(5).
1983—Subsec. (a).
Subsec. (d)(4).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Amendment by
Effective Date of 2020 Amendment
Amendment by
Effective Date of 2017 Amendment
Amendment by
Effective Date of 2004 Amendment
Amendment by
Effective Date of 2001 Amendment
Amendment by
Effective Date of 1998 Amendment
Effective Date of 1996 Amendment
Amendment by section 1807(c)(2) of
Effective Date of 1994 Amendment
Effective Date of 1993 Amendment
Effective Date of 1988 Amendment
Amendment by section 1001(e) of
Effective Date of 1986 Amendment
Amendment by section 131(b)(2) of
Amendment by section 1301(j)(8) of
Amendment by section 1847(b)(2) of
Amendment by section 12111(b) of
Effective Date of 1984 Amendment
Amendment by section 474(r)(2) of
Amendment by section 2661 of
Effective Date of 1983 Amendment
Amendment by
Effective Date
"(1)
"(2)
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§87. Alcohol and biodiesel fuels credits
Gross income includes—
(1) the amount of the alcohol fuel credit determined with respect to the taxpayer for the taxable year under section 40(a),
(2) the biodiesel fuels credit determined with respect to the taxpayer for the taxable year under section 40A(a), and
(3) the sustainable aviation fuel credit determined with respect to the taxpayer for the taxable year under section 40B(a).
(Added
Editorial Notes
Amendments
2022—Par. (3).
2004—
1984—
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by
Effective Date
Section applicable to sales or uses after Sept. 30, 1980, in taxable years ending after such date, see section 232(h)(1) of
§88. Certain amounts with respect to nuclear decommissioning costs
In the case of any taxpayer who is required to include the amount of any nuclear decommissioning costs in the taxpayer's cost of service for ratemaking purposes, there shall be includible in the gross income of such taxpayer the amount so included for any taxable year.
(Added
Editorial Notes
Amendments
1986—
Statutory Notes and Related Subsidiaries
Effective Date of 1986 Amendment
Amendment by
Effective Date
Section effective July 18, 1984, with respect to taxable years ending after such date, see section 91(g)(5) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
[§89. Repealed. Pub. L. 101–140, title II, §202(a), Nov. 8, 1989, 103 Stat. 830 ]
Section, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Nonenforcement of Section for Fiscal Year 1990
Transitional Provisions
Part-Time Employee Defined for Purposes of Subsection (f)
§90. Illegal Federal irrigation subsidies
(a) General rule
Gross income shall include an amount equal to any illegal Federal irrigation subsidy received by the taxpayer during the taxable year.
(b) Illegal Federal irrigation subsidy
For purposes of this section—
(1) In general
The term "illegal Federal irrigation subsidy" means the excess (if any) of—
(A) the amount required to be paid for any Federal irrigation water delivered to the taxpayer during the taxpayer year, over
(B) the amount paid for such water.
(2) Federal irrigation water
The term "Federal irrigation water" means any water made available for agricultural purposes from the operation of any reclamation or irrigation project referred to in paragraph (8) of section 202 of the Reclamation Reform Act of 1982.
(c) Denial of deduction
No deduction shall be allowed under this subtitle by reason of any inclusion in gross income under subsection (a).
(Added
Editorial Notes
References in Text
Section 202 of the Reclamation Reform Act of 1982, referred to in subsec. (b)(2), is classified to
Statutory Notes and Related Subsidiaries
Effective Date
§91. Certain foreign branch losses transferred to specified 10-percent owned foreign corporations
(a) In general
If a domestic corporation transfers substantially all of the assets of a foreign branch (within the meaning of section 367(a)(3)(C), as in effect before the date of the enactment of the Tax Cuts and Jobs Act) to a specified 10-percent owned foreign corporation (as defined in section 245A) with respect to which it is a United States shareholder after such transfer, such domestic corporation shall include in gross income for the taxable year which includes such transfer an amount equal to the transferred loss amount with respect to such transfer.
(b) Transferred loss amount
For purposes of this section, the term "transferred loss amount" means, with respect to any transfer of substantially all of the assets of a foreign branch, the excess (if any) of—
(1) the sum of losses—
(A) which were incurred by the foreign branch after December 31, 2017, and before the transfer, and
(B) with respect to which a deduction was allowed to the taxpayer, over
(2) the sum of—
(A) any taxable income of such branch for a taxable year after the taxable year in which the loss was incurred and through the close of the taxable year of the transfer, and
(B) any amount which is recognized under section 904(f)(3) on account of the transfer.
(c) Reduction for recognized gains
The transferred loss amount shall be reduced (but not below zero) by the amount of gain recognized by the taxpayer on account of the transfer (other than amounts taken into account under subsection (b)(2)(B)).
(d) Source of income
Amounts included in gross income under this section shall be treated as derived from sources within the United States.
(e) Basis adjustments
Consistent with such regulations or other guidance as the Secretary shall prescribe, proper adjustments shall be made in the adjusted basis of the taxpayer's stock in the specified 10-percent owned foreign corporation to which the transfer is made, and in the transferee's adjusted basis in the property transferred, to reflect amounts included in gross income under this section.
(Added
Editorial Notes
References in Text
The date of the enactment of the Tax Cuts and Jobs Act, referred to in subsec. (a), probably means the date of enactment of title I of
Statutory Notes and Related Subsidiaries
Effective Date
Transition Rule
PART III—ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
Editorial Notes
Amendments
2022—
2021—
2019—
2018—
2017—
2015—
2014—
2011—
2010—
2009—
2007—
2004—
2003—
2002—
2000—
1997—
1996—
1992—
1990—
1988—
1986—
1984—
1983—
1981—
1980—
1978—
1976—
1969—
1966—
1964—
1958—
Statutory Notes and Related Subsidiaries
Exclusion From Gross Income of Certain Clean Coal Power Grants to Non-Corporate Taxpayers
"(a)
"(b)
"(c)
"(d)
"(e)
No Federal Income Tax on Restitution Received by Victims of the Nazi Regime or Their Heirs or Estates
"(a)
"(1) shall not be included in gross income; and
"(2) shall not be taken into account for purposes of applying any provision of such Code which takes into account excludable income in computing adjusted gross income, including section 86 of such Code (relating to taxation of Social Security benefits).
For purposes of such Code, the basis of any property received by an eligible individual (or the individual's heirs or estate) as part of an excludable restitution payment shall be the fair market value of such property as of the time of the receipt.
"(b)
"(c)
"(1) is payable by reason of the individual's status as an eligible individual, including any amount payable by any foreign country, the United States of America, or any other foreign or domestic entity, or a fund established by any such country or entity, any amount payable as a result o