Internal Revenue Bulletin:  2011-30 

July 25, 2011 

Rev. Rul. 2011-15


Life insurance gross income; original issue discount. This ruling concludes that the 1994 publication of regulations concerning original issue discount (OID) rendered obsolete Rev. Rul. 58-225, 1958-1 C.B. 258, which held that a life insurance company must include in taxable income the amount of interest collected in advance under policyholder loans. Rev. Rul. 58-225 obsoleted.

Rev. Rul. 58-225, 1958-1 C.B. 258, concluded that interest collected in advance by a life insurance company on policyholder loans (“prepaid interest”) constitutes taxable income in the year received. In general, under the final original issue discount (“OID”) regulations that were published in 1994 (T.D. 8517, 1994-1 C.B. 38 [59 FR 4799]), a payment of an amount designated as “prepaid interest” is not includible in the holder’s taxable income in the year received. For example, see § 1.1273-2(g)(2) of the Income Tax Regulations (certain payments made at the inception of a loan reduce the issue price of the loan and, in effect, are includible in taxable income over the term of the loan). Consequently, the final OID regulations have made Rev. Rul. 58-225 obsolete.

EFFECT ON OTHER DOCUMENTS

Rev. Rul. 58-225 is obsolete.

DRAFTING INFORMATION

The principal author of this revenue ruling is Donald J. Drees, Jr. of the Office of the Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue ruling, contact Mr. Drees at (202) 622-3970 (not a toll-free call).


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