KCI Tax Interpretation 2018
The KCI Tax InterpretationTM is a 275+ page business specification detailing methods & calculations for providing tax law compliance testing for life insurance contracts. This document provided the functional specifications for the development of the KCI Tax Server software system. It contains the detailed processing rules, formulas, techniques, and examples necessary to build an automated tax system.
Support for variable, universal, and traditional life insurance products and their associated riders and benefits.
Tax functionality includes:
· Internal Revenue Code Section 72(e)
o Tracking the flow of money in a policy
o Cost basis tracking
o Taxable gain determination
· Section 7702 (DEFRA)
o Definition of life insurance
o Cash value accumulation testing
o Guideline premium testing and adjustments
o Recapture ceiling
· Section 7702A (TAMRA)
o MEC testing, 7-Pay testing, two year lookback
o Necessary Premium testing, Deemed Cash Value
o Reduction testing
o Material Change testing
o Grandfather testing
· 1035 exchanges – incoming and outgoing, boot taxation
· 1099 formatting (codes 1, 6, 7, W)
Transaction support for all significant policy tax events (e.g. premium payments, partial surrenders, loans, contract changes, lapse, etc.).
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Last updated: December 29, 2017