Retirement CD blends annuity and bank deposit and leaves tax treatment ambiguous
Article Abstract:
A new bank instrument called the retirement CD, which appears to combine the tax deferral of annuity contracts with the federal protection of bank deposits, has caused uncertainty in the tax community and concern in the insurance industry. The terms of the retirement CD define minimum deposits and future contributions as well as early withdrawal rules and interest on the account. The Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency have acknowledged that the instrument is federally insured, but there has been no official statement on whether in will be tax deferred under IRC section 72.
Publication Name: Journal of Taxation of Investments
Subject: Law
ISSN: 0747-9115
Year: 1995
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Proposed regulations create problems for retirement CDs
Article Abstract:
The proposed IRS regulations issued under IRC section 1275 would limit the ability of bank products such as the retirement certificate of deposit to benefit from the favorable tax rules for annuities while providing FDIC protection as investment products. Under IRC section 72, annuities issued by insurance companies are exempt from original issue discount (OID) rules. The new bank products would be subject to section 1275 and would need to meet a very limited exception to be exempt from OID rules. Insurance companies have opposed bank issuance of these products.
Publication Name: Journal of Taxation of Investments
Subject: Law
ISSN: 0747-9115
Year: 1995
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Final regulations sound the death knell for retirement CDs
Article Abstract:
The so-called "retirement CD", a type of bank-underwritten noninsurance annuity, has been rendered nearly unmarketable by the final IRC s. 1275 regulations. The original issue discount rules are considered applicable to these bank products, much to the dismay of the institutions offering them. However, the decision to treat these annuities as debt instruments, rather than as similar to commercial annuity contracts, is consistent with prior rulings in this area.
Publication Name: Journal of Taxation of Investments
Subject: Law
ISSN: 0747-9115
Year: 1998
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