Option to receive annuity in lieu of lump sum
If—
(1)#
a contract provides for payment of a lump sum in full discharge of an obligation under the contract, subject to an option to receive an annuity in lieu of such lump sum;
(2)#
the option is exercised within 60 days after the day on which such lump sum first became payable; and
(3)#
part or all of such lump sum would (but for this subsection) be includible in gross income by reason of subsection (e)(1),
then, for purposes of this subtitle, no part of such lump sum shall be considered as includible in gross income at the time such lump sum first became payable.