Life Insurance Section 1035 Exchanges & Reportable Policy Sale Reporting

Current understanding

IRS and Treasury have finalized regulations clarifying how the transfer-for-valuable-consideration rules under IRC §101(a)(2) and information reporting requirements for reportable policy sales and reportable death benefits apply to Section 1035 like-kind exchanges of life insurance contracts, as well as to policies acquired in corporate reorganizations. The rules affect insurers, policyholders, and secondary-market buyers by specifying when death benefits remain tax-free versus taxable and when Forms 1099-SB and 1099-LS must be filed. Status: final rule.

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