[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.72-10]

[Page 257-258]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.72-10  Effect of transfer of contracts on investment in the 
contract.

    (a) If a contract to which section 72 applies, or any interest 
therein, is transferred for a valuable consideration, by assignment or 
otherwise, only the actual value of the consideration given for such 
transfer and the amount of premiums or other consideration subsequently 
paid by the transferee shall be included in the transferee's aggregate 
of premiums or other consideration paid. In accordance with the 
provisions of section 72(g)(3) and paragraph (b) of Sec. 1.72-4, an 
annuity

[[Page 258]]

starting date shall be determined for the transferee without regard to 
the annuity starting date, if any, of the transferor. In determining the 
transferee's investment in the contract, the aggregate amount of 
premiums or other consideration paid shall be reduced by all amounts 
received by the transferee before the receipt of an amount as an annuity 
or before the annuity starting date, whichever is the later, to the 
extent that such amounts were excludable from his gross income under the 
applicable income tax law at the time of receipt. For the treatment of 
amounts received by the transferee subsequent to both the annuity 
starting date and the date of receipt of a payment as an annuity, but 
not received as annuity payments, see Sec. 1.72-11. For a limitation on 
adjustments to the basis of annuity contracts sold, see section 1021.
    (b) In the case of a transfer of such a contract without valuable 
consideration, the annuity starting date and the expected return under 
the contract shall be determined as though no such transfer had taken 
place. See paragraph (b) of Sec. 1.72-4. The transferee shall include 
the aggregate of premiums or other consideration paid or deemed to have 
been paid by his transferor in the aggregate of premiums or other 
consideration as though paid by him. In determining the transferee's 
investment in the contract, the transferee's aggregate amount of 
premiums or other consideration paid (as so found) shall be reduced by 
all amounts either received or deemed to have been received by himself 
or his transferor before the annuity starting date, or before the date 
on which an amount is first received as an annuity, whichever is the 
later, to the extent that such amounts were excludable from the gross 
income of the actual recipient under the applicable income tax law at 
the time of receipt. For treatment of amounts received subsequent to 
both the above dates by such transferee, but not received as annuity 
payments, see Sec. 1.72-11.