4023 / What are the income tax results of a split dollar plan entered into, or materially modified, after September 17, 2003?
The tax treatment of a split dollar arrangement depends on when the arrangement is entered into. For split dollar arrangements entered into after September 17, 2003, the taxation of the arrangement generally is governed by regulations issued in 2003. Split dollar arrangements entered into before September 18, 2003, generally are governed by revenue rulings and other guidance issued by the IRS between 1964 and the issuance of the final regulations ( Q 4027).
For split dollar arrangements entered into after September 17, 2003, the tax treatment will be governed by one of two mutually exclusive regimes. The arrangement will be treated either as (1) one in which the life insurance policy owner provides economic benefits to the non-owner ( Q 4024) or (2) one in which the non-owner makes loans to the owner ( Q 4025).1 The person named on the policy as the owner generally is considered the owner of the policy. A non-owner is any person other than the owner who has an interest in a policy except for a life insurance company acting only as the issuer of the policy.2
1. Treas. Reg. § 1.61-22(b)(3).