Buyer Of Structured Settlement Annuity

Structured Settlement Annuities

A Little History on Structured Settlement Annuities
The concept as we know it today actually began back in 1979 with the issuance of two revenue rulings by the Internal Revenue Service. Revenue Ruling 79-220 [1979-2 C.B. 74] states that: An insurance company purchase and retain exclusive ownership in a single premium annuity contract in order to fund monthly payments agreed to during the settlement of a damage suit. The issue was whether the exclusion from gross income under IRC §§ 104(a)(2) applied to the full amount of monthly payments received in the settlement or only to the discounted present value of such payments. The IRS said the recipient may exclude the full amount of the payments from gross income under section 104(a)(2) of the Code, and that payments made to the estate after the recipient's death were also fully excluded from taxable income.

The second Revenue Ruling 79-313 [1979-2 C.B. 75] states that: A taxpayer would receive payments in a settlement with an insurance company for personal injury as a result of an accident. The insurance company agreed to make 50 consecutive annual payments, each of which would be increased each year by 5% for inflation. The entire amount of the payments received, including the growth of the annuity, is excluded from gross income under section 104(a)(2) of the Code. The IRS did note that "the taxpayer has neither actual nor constructive receipt, nor the economic benefit of the present value of the damages." In addition, the settlement in 79-313 also provides that "the taxpayer does not have the right to accelerate any payment or increase or decrease the amount of the annual payments specified." Luckily, these rulings have been somewhat modified to allow for the selling of them as long as certain legal guidelines are followed.

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