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Abstract: 

Section 1234A(1) provides for capital treatment on gain or loss attributable to the cancellation, lapse, expiration, or other termination of a right or obligation (other than a securities futures contract described in Section 1234B) on property which is (or on its acquisition would be) a capital asset in the hands of the taxpayer. The issue in TAM 2004520331 concerned the extent Section 1234A applied to amounts received in surrender or termination of whole life insurance contracts. The Service concluded that amounts received on termination or surrender of whole life contracts were not covered by Section 1234A “to the extent the amounts are attributable to ordinary income accretions in the contracts’ value.

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