IRS PLR: Life Insurance Advisory Fees Won’t Be Treated as Amounts Received by Annuity Contract Owners (IRC §72)

Certain investment advisory fees a life insurance company pays to an advisor out of an annuity contract’s cash value won’t be treated as an amount received by the contract owner, the IRS concluded in multiple letter rulings (with varying dates) based on tax code Section 72(e), which distinguishes between an “amount received as an annuity” under an annuity, endowment, or life insurance contract and an amount not received as such. As compensation solely for advice relating to the contract, the fees are an expense of the contract and not a distribution to the owner, the IRS explained in ...