Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 73-67

1973-1 C.B. 330

Sec. 801

IRS Headnote

A life insurance company with reserves in a segregated asset account to provide annuity benefits under qualified pension plans may not transfer assets other than cash between its general accounts and the segregated asset account.

Full Text

Rev. Rul. 73-67

L is a life insurance company subject to tax under section 802 of the Internal Revenue Code of 1954. As part of its general life insurance business, L provides variable annuity benefits to policyholders under qualified pension plans described in subparagraphs (A), (B), (C), or (D) of section 805(d)(1) of the Code which meet the requirements of section 401(a) of the Code. During the taxable year, L proposed to establish a segregated asset account under section 801(g) of the Code in which to hold the funds required to cover its obligations under the plans. L also proposed to transfer into the segregated asset account bonds, common stock, and other assets from its general asset accounts, and to simultaneously establish a reserve based on such segregated asset account. The segregated asset account thus established would meet the requirements of the applicable state law. L would be considered to be the owner of the assets in such segregated asset account for corporate, annual statement, and Federal income tax purposes.

Held, pursuant to the accounting required with respect to operation of a segregated asset account under section 801(g) of the Code, transfers into L's segregated asset account for its qualified pension plans from L's general asset accounts, and from L's segregated asset account for its qualified pension plans to L's general asset accounts may be made only in "money" as that term is defined in section 1.805-5(a)(4)(i) of the Income Tax Regulations. After cash has been transferred to or placed in L's segregated asset account, pursuant to section 801(g)(6) and (7) of the Code, the basis of assets purchased for and remaining in such segregated asset account for qualified pension plans must be adjusted for changes in the fair market value of such assets concurrently with changes in L's reserves based on the segregated asset account.