Comments Concerning IRS Notice 2001–10
I. Characterizing Equity SDAs
- Section 83
We question whether Section 83 can be a viable approach to tax incremental CSV increases during the term of an Equity SDA as suggested by TAM 96-04-001. Applying Section 83 in this manner raises numerous practical problems for tax administration. As discussed below, it is unclear when a "transfer of property" has occurred due to the requirements under Section 83, the legal ownership structure of Equity SDAs and the nature of permanent whole life insurance contracts. Set forth below are our comments regarding how Section 83 might apply to Equity SDAs consistent with providing clear and objective rules to taxpayers, protecting the integrity of the tax system and reducing tax compliance costs.