CLARIFICATION OF TAX BASIS OF LIFE INSURANCE CONTRACTS.

SEC. 13521. CLARIFICATION OF TAX BASIS OF LIFE INSURANCE CONTRACTS.(a) Clarification With Respect to Adjustments.—Paragraph (1) of section 1016(a) is amended by striking subparagraph (A) and all that follows and inserting the following:“(A) for—“(i) taxes or other carrying charges described in section 266; or“(ii) expenditures described in section 173 (relating to circulation expenditures),for which deductions have been taken by the taxpayer in determining taxable income for the taxable year or prior taxable years; or“(B) for mortality, expense, or other reasonable charges incurred under an annuity or life insurance contract;”.(b) Effective Date.—The amendment made by this section shall apply to transactions entered into after August 25, 2009.