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TITLE 26-INTERNAL REVENUE CODE (B) Account treated as plan For purposes of this title, a custodial ac- count which satisfies the requirements of section 401(f)(2) shall be treated as an orga- nization described in section 401(W) solely for purposes of subchapter F and subtitle F with respect to amounts received by it (and income from investment thereof). (C) Regulated investment company For purposes of this paragraph, the term "regulated investment company" means a domestic corporation which is a regulated investment company within the meaning of section 851(a). (c) Taxability of beneficiary under nonqualified an- nuities or under annuities purchased by exempt organizations Premiums paid by an employer for an annu- ity contract which is not subject to subsection (a) shall be included in the gross income of the employee in accordance with section 83 (relat- ing to property transferred in connection with performance of services), except that the value of such contract shall be substituted for the fair market value of the property for purposes of applying such section. The preceding sen- tence shall not apply to that portion of the pre- miums paid which is excluded from gross income under subsection (b). The amount actu- ally paid or made available to any beneficiary under such contract shall be taxable to him in the year in which so paid or made available under section 72 (relating to annuities). (Aug. 16, 1954, ch. 736, 68A Stat. 137; Sept. 2, 1958, Pub. L. 85-866, title I, § 23(a)-(c), 72 Stat. 1620-1622; Oct. 4, 1961, Pub. L. 87-370, § 3(a), 75 Stat. 801; Oct. 10, 1962, Pub. L. 87-792, § 4(d), 76 Stat. 825; Feb. 26, 1964, Pub. L. 88-272, title II, § 232(e)(4)-(6), 78 Stat. 111; Dec. 30, 1969, Pub. L. 91-172, title III, § 321(b)(2), title V, § 515(a)(2), 83 Stat. 591, 644; Sept. 2, 1974, Pub. L. 93-406, title II, §§ 1022(e), 2002(g)(6), 2004(c)(4), 2005(b)(2), 88 Stat. 940, 969, 986, 991; Apr. 15, 1976, Pub. L. 94-267, § 1(b), 90 Stat. 366; Oct. 4, 1976, Pub. L. 94-455, title XIV, § 1402(b)(1)(D), title XV, § 1504(a), title XIX, §§ 1901(a)(58), (b)(8)(A), 1906(b)(13)(A), 90 Stat. 1731, 1732, 1738, 1774, 1794, 1834.) TAXABLE YEARs AFTER 1977 Subsec. (a)(2)(A) of this section amended by Pub. L. 94-455, title XIV, § 1402(b)(2), Oct. 4, 1976, 90 Stat. 1732, effective for tax- able years beginning after Dec. 31, 1977, by substituting "1 year"for "9 months". AMENDMENTS 1976-Subsec. (a)(2)(A). Pub. L. 94-455, § 1402(b) (1)(D), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977. Subsec. (a)(4). Pub. L. 94-455, § 1901(a)(58), re-en- acted the provisions following subpar. (C) without sub- stantive change. Pub. L. 94-267, § 1(b)(2), substituted "a payment" for "the lump-sum distribution". Subsec. (a)(4)(A). Pub. L. 94-267, § l(b)(1). restruc- tured provisions by adding cl. (1) and designating exist- ing provision as cl. (ii). Subsec. (a)(5). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary", wherever appearing. Pub. L. 94-267, § l(b)(3), added subsec. (a)(5). Subsec. (b)(1)(A)(ii). Pub. L. 94-455, § 1901(b)(8)(A), substituted "educational organization described in sec- tion 170(b)(1)(A)(ii)" for "educational institution (as defined in section 151(e)(4))". Subsec. (b)(4)(B). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (b)(7)(C). Pub. L. 94-455, § 1504(a), struck out ", and which issues only redeemable stock" follow- ing "regulated investment company within the mean- ing of section 851(a)". 1974-Subsec. (a)(2). Pub. L. 93-406, § 2005(b)(2), substituted "a lump sum distribution (as defined in section 4002(e)(4)(A)) is paid to the recipient" for "the total amounts payable by reason of an employee's death or other separation from the service, or by reason of the death of an employee after the employ- ee's separation from the service, are paid to the payee within one taxable year of the payee" as cl. (iii) of subpar. (A), substituted "so much of the total taxable amount (as defined in section 402(e)(4)(D)) of such distribution as is equal to the product of such total taxable amount multiplied by the fraction described in section 402(a)(2) shall be treated as a gain from the sale or exchange of a capital asset held for more than 6 months. For purposes of this paragraph, in the case of an individual whn is an employee without regard to section 401(c)(1), determination of whether or not any distribution is a lump sum distribution shall be made without regard to the requirement that an election be made under subsection (e)(4)(B) of section 402, but no distribution to any taxpayer other than an individual, estate, or trust may be treated as a lump sum distribu- tion under this paragraph" for "then the amount of such payments, to the extent exceeding the amount contributed by the employee (determined by applying section 72(f)), which employee contributions shall be reduced by any amounts theretofore paid to him which were not includible in gross income, shall be considered a gain from the sale or exchange of a cap- ital asset held for more than 6 months. This subpara- graph shall not apply to amounts paid to any payee to the extent such amounts are attributable to contribu- tions made on behalf of the employee while he was an employee within the meaning of section 401(c)(1)" fol- lowing cl. (iii) of subpar. (A), substituted provisions setting out a cross reference to section 402(e) for pro- visions defining "total amounts" as subpar. (B), and struck out subpar. (C) setting out limitations on cap- ital gains treatment. Subsec. (a)(4). Pub. L. 93-406, § 2002(g)(6), added subsec. (a)(4). Subsec. (b)(2). Pub. L. 93-406, § 2004(c)(4), designat- ed existing provisions as subpar. (A) and added subpar. (B). Subsec. (b)(7). Pub. L. 93-406, § 1022(e), added subsec. (b)(7). 1969-Subsec. (a)(2). Pub. L. 91-172, § 515(a)(2), added subpar. (C). Subsec. (c). Pub. L. 91-172, § 321(b)(2), consolidated former provisions of subsec. (c) providing for taxabil- ity of beneficiary under a nonqualified annuity, the employees gross income to include amount contribut- ed by employer for annuity contract in the year in which amount is contributed, the amount to be includ. ed as provided in section 72 of this title and former subsec. (d) of this section providing for taxability of beneficiary under certain forfeitable contracts pur- chased by exempt organizations, including farmers' cooperatives, the gross income to include amount con- tributed by employer after Dec. 31, 1957, in the year of change from forfeitable to nonforfeitable rights, the new provisions including premiums paid by an employ- er in accordance with section 83, except that value of the contract shall be substituted for fair market value of the property for purposes of applying such section 83, such provision not to be applicable to that portion of premiums paid which is excluded from gross income under subsec. (b) of this section. Subsec. (d). Pub. L. 91-172, § 321(b)(2), struck out former subsec. (d) providing for taxability of benefi- ciary under certain forfeitable contracts purchased by Page 305