Comments Concerning IRS Notice 2001–10
I. Characterizing Equity SDAs
- Section 83
- Section 83 Requires a Transfer of Property
Section 83(a) of the Code applies only if "property" is "transferred." Each of these terms has a specific meaning under Section 83 and its regulations. Treas. Reg. 1.83-3(e) provides that "[i]n the case of a transfer of a life insurance contract…only the cash surrender value of the contract is considered to be property." Cash is not "property," and presumably cash payments towards premium payments would be outside the scope of Section 83. Property becomes subject to tax under Section 83 upon its "transfer" to or for the benefit of an employee, which occurs "when a person acquires a beneficial interest in such property." These provisions suggest that there cannot be a "transfer of property" from the employer to the employee unless the employer is treated as the actual or constructive beneficial owner of the policy.