IRS PLR: Advisory Fees Paid From Annuity Contracts Won’t Be ‘Amount Received’ by Contract Owners (IRC §72)

The fees that a life insurance company deducts from the cash value of any of a variety of annuity contracts and remits to an investment adviser won’t be treated as an “amount received” by the contract owner for purposes of I.R.C. §72(e) (Amounts Not Received as Annuities) inclusion in gross income, the IRS ruled. Section 72 distinguishes between an (includible) “amount received as an annuity” under an annuity, endowment, or life insurance contract and an “amount not received as an annuity” under such contract, the IRS explained. The fees at issue constitute adviser compensation for investment advice only, ...