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TITLE 26-INTERNAL REVENUE CODE amounts shall be excluded from gross income until there has been so excluded (under section 122(b)(1) or this section, including amounts ex- cluded before January 1, 1966) an amount equal to the consideration for the contract (as de- fined by section 122(b)(2)), plus any amount treated pursuant to section 101(b)(2)(D) as ad- ditional consideration paid by the employee. Thereafter all amounts so received shall be in- cluded in gross income. (o) Cross reference For limitation on adjustments to basis of annuity con- tracts sold, see section 1021. (Aug. 16, 1954, ch. 736, 68A Stat. 20; Oct. 10, 1962, Pub. L. 87-792, §4(a), (b), 76 Stat. 821: Oct. 16, 1962, Pub. L. 87-834, § 11(b), 76 Stat. 1005; Feb. 26, 1964, Pub. L. 88-272, title II, § 232(b), 78 Stat. 110; June 21, 1965, Pub. L. 89- 44, title VIII, § 809(d)(2), 79 Stat. 167; July 30, 1965, Pub. L. 89-97, title I, § 106(d)(2), 79 Stat. 337; Mar. 8, 1966, Pub. L. 89-365, § 1(b), 80 Stat. 32; Dec. 30, 1969, Pub. L. 91-172, title V, § 515(b), 83 Stat. 644; Sept. 2, 1974, Pub. L. 93- 406, title II, §§ 2001(e)(5), (g)(1), (2)(A), (h)(2), (3), 2002(g)(10), 2005(c)(3), 2008(b)(2), 88 Stat. 955, 957, 970, 991, 994; Oct. 4, 1976, Pub. L. 94- 455, title XIX, §§ 1901(a)(12), (13), 1906(b)(13)(A), 1951(b)(1)(A), 90 Stat. 1765, 1834, 1836.) AMENDMENTS 1976-Subsec. (c)(2). Pub. L. 94-455. § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (c)(3)(A). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (d)(1). Pub. L. 94-455. § 1901(a)(12), struck out in subpar. (B) "(whether or not before January 1, 1954)" following "beginning on the date", and in provi- sions following subpar. (B) struck out "(under this paragraph and prior income tax laws)" following "until there has been so excluded". Subsec. (f). Pub. L. 94-455. § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (I). Pub. L. 94-455, § 1951(b)(1)(A), struck out subsec. (i) which related to Joint annuities where first annuitant died in 1951, 1952, or 1953. Subsec. (m)(2). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (m)(3). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (m)(4)(A). Pub. L. 94-455, § 1901(a)(13), sub- stituted "an individual retirement account" for "an in- dividual retirement amount". Subsec. (m)(5)(A)(ii). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate' following "Secretary". Subsec, (m)(7). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". 1974-Subsec. (m)(1). Pub. L. 93-406, § 2001(h)(2), struck out subsec. (m)(1) which related to certain amounts received before annuity starting date. Subsec. (m)(4)(A). Pub. L. 93-406, § 2002(g)(10)(A), inserted references to an individual retirement amount described in section 408(a) and an individual retirement annuity described in section 408(b). Subsec. (m)(5)(A). Pub. L. 93-406, § 2001(e)(5), (h)(3), substituted "(other than contributions made by him as an owner-employee)" for "(whether or not paid by him)" in cl. (I), and struck out cl. (iii) which had made reference to amounts which were received, by an indi- vidual who was or had been, an owner-employee, by reason of the distribution under the provisions of sec- tion 401(e)(2)(E) of his entire interest in all qualified trusts described in section 401(a) and in all plans de- scribed in section 403(a). Subsec. (m)(5)(B). Pub. L. 93-406, §2001(g)(1), sub- stituted provisions that if a person receives an amount to which subsec. (m)(5) applies, his tax under this chapter for the taxable year in which such amount Is received shall be increased by an amount equal to 10 percent of the portion of the amount so received which is includible in his gross income for such tax- able year for provisions that if the aggregate amounts to which subsec. (m)(5) applied received by any person in his taxable year equalled or exceeded $2,500, the in- crease In his tax for the taxable year in which such amounts were received and attributable to such amounts could not be less than 110 percent of the ag- gregate increase in taxes, for the taxable year and the 4 immediately preceding taxable years, which would have resulted if such amounts had been included in such person's gross income ratably over such taxable years, with provision for alternate computation if de- ductions had been allowed under section 404 for con- tributions paid for a number of prior taxable years less than 4. Subsec. (m)(5)(C) to (E). Pub. L. 93-406, § 2001(g)(2)(A), struck out subpars. (C), (D), and (E) which had laid down special rules for the application of subsec. (m)(5). Subsec. (m)(6). Pub. L. 93-406, § 2002(g)(10)(B), in- serted reference to an individual for whose benefit an individual retirement account or annuity described in section 408 (a) or (b) is maintained. Subsec. (n). Pub. L. 93-406, §§ 2005(c)(3), 2008(b)(2), redesignated former subsec. (o) as (n) and in the sub- section catchline of subsec. (n) as so redesignated in- serted reference to survivor benefit plan. Former subsec. (n). which had set out the provisions covering the treatment to be accorded total distributions, was stricken. Subsec. (W). Pub. L. 93-406, § 2005(c)(3), redesignated former subsec. (p) as (W). Former subsec. (o) redesig- nated (n) and amended. Subsec. (p). Pub. L. 93-406, § 2005(c)(3), redesignated former subsec. (p) as (W). 1969-Subsec. (n)(1). Pub. L. 91-172, § 515(b)(1). al- tered section to accommodate the insertion into sec- tions 402 and 403 of provisions under which employer contributions to qualified pension, profit sharing, stock bonus, and annuity plans for plan years begin- ning after 1969 are to be treated as ordinary income when received in a lump sum distribution, but with such amounts to be eligible for a special averaging pro- cedure. Subsec. (n)(4). Pub. L. 91-172, §515(b)(2), added subsec. (n)(4). 1966-Subsec. (W). Pub. L. 89-365 added subsec. (W). Former subsec. (o) redesignated (p). Subsec. (p). Pub. L. 89-365 redesignated former subsec. (o) as (p). 1965-Subsec. (m)(5)(A)(l). Pub. L. 89-97, § 106(d)(2)(A), substituted "paragraph (7) of this sub- section" for "section 213(g)(3)". Subsec. (m)(7). Pub. L. 89-97, § 106(d)(2)(B), added par. (7). Subsec. (n)(1). Pub. L. 89-97, § 106(d)(2)(C), substi- tuted in subpars. (A)(iii) and (B)(iii) "subsection (m)(7)" for "section 213(g)(3)". Subsec. (n)(3). Pub. L. 89-44 struck out "section 31" in the sentence following subpar. (B) and inserted in lieu thereof "sections 31 and 39". 1964-Subsec. (e)(3). Pub. L. 88-272 eliminated par. (3) which provided for a limit on the tax attributable to the receipt of a lump sum. 1962-Subsec. (d)(2). Pub. L. 87-792, § 4(a), designat- ed existing provisions as ci. (A) and added cl. (B). Subsec. (f). Pub. L. 87-834 inserted sentence provid- ing that par. (2) shall not apply to amounts which were contributed by the employer after Dec. 31, 1962, and which would not have been includible in the gross income of the employee by reason of the application of Section 911 if such amounts had been paid directly to the employee at the time of contribution, and making such sentence inapplicable to amounts which were contributed by the employer, as determined under regulations, to provide pension or annuity cred- its, to the extent such credits are attributable to ser- Page 102