(1) The amount received by any person as an accelerated payment or payments of part or all of the death benefit or special surrender value under a life insurance policy as a result of any of the diagnoses specified in section 1113(1)(a)(1)(A) and (B) of the Insurance Law, ( i.e., [i] a terminal illness defined as a life expectancy of 12 months or less, or [ii] a medical condition or extraordinary medical care or treatment regardless of life expectancy) to the extent such amount is includible in gross income for Federal income tax purposes.

(2) The amount received by any person as a viatical settlement in accordance with the provisions of article 78 of the Insurance Law to the extent such amount is includible in gross income for Federal income tax purposes. For purposes of this paragraph, a viatical settlement means an agreement in which the owner of a life insurance policy on a person who has a catastrophic or life threatening illness or condition, assigns the death benefit of such policy to an entity for compensation or anything of value, which is less than the expected death benefit value of the insurance policy.

(3) The amounts referred to in paragraphs (1) and (2) of this subdivision may be subtracted from Federal adjusted gross income in accordance with section 612(c)(30) of the Tax Law.