On January 26, 2007, the Internal Revenue Service (IRS) released Notice 2007-15 which provides guidance regarding closing agreements under sections 7702, 7702A, and 817(h). The notice requests comments from taxpayers on a number of issues. These comments may be very material to the manner in which the IRS processes these closing agreements in the future. The Notice includes four model closing agreements, in draft form, that the Service anticipates using.
The IRS released Notice 2006-95 (with an effective date of October 12, 2006), which provides guidance regarding the use by taxpayers of either 1980 CSO or 2001 CSO in determining whether mortality charges are reasonable within the meaning of section 7702(c)(3)(B)(i). More specifically, the Notice supplements Notice 88-128, 1988-2 C.B. 540, and modifies and supersedes Notice 2004-61, 2004-2 C.B. 596. The modifications to Notice 2004-61 impact the 1980 CSO Safe Harbor, Unisex & Smoker/Nonsmoker Rules, Issue date with Death Benefit increases and decreases, and Grandfathering of contracts issued based upon previous tables.
Treasury and IRS Provide Guidance on Attained Age Determination: The Department of Treasury and the IRS have issued final regulations providing guidance on determining an insured's attained age for purposes of testing a policy's compliance with IRC section 7702. Guidance is provided for both single and multiple life attained age determination. The specifics of the attained age guidance are found in added section 1.7702-2.