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Abstract: 

In January 2002, Treasury and the Internal Revenue Service issued Notice 2002-8, a notice that was considered generally favorable for split dollar arrangements, in that it grandfathered a great many split dollar arrangements that were in existence or implemented prior to January 28, 2002. The rules under this Notice for arrangements that were not grandfathered, although not as generous, were generally seen as workable, with a few issues, until the issuance of final regulations. The final regulations, the Notice warned, would be even less generous, and would impose a system of two mutually exclusive regimes of taxing split dollar arrangements, the “economic benefit regime” and “loan regime.” This warning about the final regulations was worrisome, but it was anticipated that, given the Service’s reasonable approach under Notice 2002-8, the issues raised by such a system could be worked out and split dollar arrangements, albeit less financially generous, would continue.

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Affiliations:  1: Steptoe & Johnson.