IRS letter ruling - Tax treatment of restructured insurance policies under plan of rehabilitation 

July 18:  The IRS today publicly released a private letter ruling* that addresses the income tax consequences of a court-ordered plan of rehabilitation of an insurance company on its insurance policies. PLR 2014290007 (released July 18, 2014, and dated March 12, 2014)

In PLR 2014290007 [PDF 58 KB], the IRS concluded that:


  • Policies that are restructured under the rehabilitation plan will be treated as insurance contracts under subchapter L of the Code.
  • Concerning a loss incurred under the policies, the obligations to pay both interim payments and deferred amounts (including accretion, over time) are taken into account in computing “losses incurred” under section 832(b)(5) and Reg. section 1.832-4(b).

*Private letter rulings are taxpayer-specific rulings furnished by the IRS National Office in response to requests made by taxpayers and can only be relied upon by the taxpayer to whom issued. It is important to note that, pursuant to section 6110(k)(3), such items cannot be used or cited as precedent. Nonetheless, such rulings can provide useful information about how the IRS may view certain issues.




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