Employer-owned life insurance contract

For purposes of this subsection, the term “employer-owned life insurance contract” means a life insurance contract which—

(i) is owned by a person engaged in a trade or business and under which such person (or a related person described in subparagraph (B)(ii)) is directly or indirectly a beneficiary under the contract, and

(ii) covers the life of an insured who is an employee with respect to the trade or business of the applicable policyholder on the date the contract is issued.

For purposes of the preceding sentence, if coverage for each insured under a master contract is treated as a separate contract for purposes of sections 817(h), 7702, and 7702A, coverage for each such insured shall be treated as a separate contract.

For purposes of this subsection—

(i) In general The term “applicable policyholder” means, with respect to any employer-owned life insurance contract, the person described in subparagraph (A)(i) which owns the contract.

(ii) Related persons The term “applicable policyholder” includes any person which— (I) bears a relationship to the person described in clause (i) which is specified in section 267(b) or 707(b)(1), or (II) is engaged in trades or businesses with such person which are under common control (within the meaning of subsection (a) or (b) of section 52).