Form 1099-SB 2019: Seller’s Investment in Life Insurance Contract
Form 1099-SB reports the seller's investment in a life insurance contract and surrender amount for reportable policy sales under IRC Section 6050Y or transfers to foreign persons. The December 2019 revision clarifies issuer contact information requirements and aligns Box 1 reporting with contemporaneous life insurance policy transfer regulations. Section 6050Y became effective for transfers occurring after December 31, 2017, establishing the reporting framework that the 2019 form implements.
This form is used by the issuer of a life insurance contract to report specific information to both the Internal Revenue Service and the seller. The 2019 revision incorporates all final regulatory language and removes placeholder or temporary guidance from earlier draft versions.
Issuer Filing Steps
Step 1: Verify Reporting Requirements
Verify that a reportable policy sale or transfer to a foreign person occurred during calendar year 2019 under Section 6050Y rules. Retain documentation of the transfer date and transferee identity for compliance purposes. A reportable policy sale is any direct or indirect acquisition of any interest in a life insurance contract if the acquirer, at the time of acquisition, has no substantial family, business, or financial relationship with the person insured under that contract.
Step 2: Obtain Seller Information
Obtain the seller's complete Taxpayer Identification Number (TIN), including all nine digits, and enter it on Copy A filed with the Internal Revenue Service. Pursuant to Regulations section 301.6109-4, all filers may truncate the seller's TIN on Copy B furnished to the seller, but truncation is not allowed on any documents filed with the IRS. An issuer's TIN may not be truncated on any form.
Step 3: Calculate Investment in Contract
Calculate Box 1 (Investment in Contract) using the definition in Regulations section 1.6050Y-1(a)(7). For the original policyholder of a life insurance contract, investment in the contract means the aggregate amount of premiums or other consideration paid for the contract, less the aggregate amount received under the agreement, to the extent that such amount was excludable from gross income.
For any other person, investment in the contract means an estimate of investment in the contract, which is the aggregate amount of premiums paid for the contract by that person, less the aggregate amount received under the contract by that person, to the extent such information is known to or can reasonably be estimated by the issuer. Document the calculation methodology with policy records to support the reported amount.
Step 4: Determine Surrender Amount
Determine Box 2 (Surrender Amount) as the amount the policyholder would have received upon surrender as of the transfer date. In general, the surrender amount is the amount the seller would have received from the issuer responsible for administering the life insurance contract if the seller had surrendered the life insurance contract to the issuer on the date of the reportable policy sale or the transfer of the contract to a foreign person. Use the policy's cash surrender value statement current to 2019 to determine this amount accurately.
Step 5: Complete Policy and Contact Information
Enter the policy number assigned by your company and match it precisely to the policyholder's policy documentation to prevent reporting mismatches. The policy number is the unique identifying number assigned to the life insurance contract by the issuer responsible for administering the contract. Complete the issuer's information contact section with a name, street address, city, state, country, ZIP code, and telephone number of the person who can field seller inquiries.
The issuer's information contact name must be provided in the appropriate box, and the individual named must be familiar with the reporting requirements of reportable policy sales. If this differs from the issuer's primary address, provide both addresses to facilitate seller inquiries.
Step 6: Address Corrections and Rescissions
Mark the CORRECTED box only if you are submitting a replacement Form 1099-SB for a previously filed 2019 return. Identify the original Form 1099-SB by policy number and seller TIN to ensure proper processing. If a reportable policy sale or transfer of an insurance contract to a foreign person is rescinded and you have filed Form 1099-SB with respect to the reportable policy sale or transfer, you must file a corrected Form 1099-SB within 15 calendar days of the receipt of notice of the rescission.
If you have furnished a statement with respect to the reportable policy sale or transfer to a seller, you must provide the recipient of the statement with a corrected statement within 15 calendar days of the receipt of notice of the rescission.
Step 7: Prepare and File Forms
Prepare Form 1096 (Annual Summary and Transmittal of Certain Information Returns) as the cover sheet for all 2019 Forms 1099-SB filed with the IRS. Aggregate all sellers' Box 1 and Box 2 amounts on the Form 1096 for proper transmittal. File Form 1099-SB and Form 1096 with the Internal Revenue Service by February 28, 2020, if filing on paper, or March 31, 2020, if filing electronically.
Step 8: Furnish Statements to Sellers
Furnish Copy B to the seller no later than February 15, 2020. This deadline applies to the general reporting scenario for reportable policy sales and transfers to foreign persons. Include the issuer's contact information so the seller can request clarification if needed. If a 6050Y(b) issuer does not receive notice of a transfer to a foreign person until after January 31 of the calendar year following the year in which the transfer occurred, each statement required must be furnished by the date thirty days after the date notice is received.
Seller Receipt and Reporting Steps
Step 9: Verify Received Information
Upon receipt of Copy B of Form 1099-SB, verify that the policy number, issuer name, and your TIN match your records. The TIN may be displayed in truncated form for privacy purposes on Copy B, showing only the last four digits. Review all amounts reported to ensure accuracy before including them on your tax return.
Step 10: Report on Tax Return
Report Box 1 (Investment in Contract) and Box 2 (Surrender Amount) on your 2019 tax return if you have a reportable policy sale. Coordinate with Schedule D (Capital Gains and Losses) or Form 4797 (Sales of Business Property) reporting if the sale generates a gain or loss. The tax treatment depends on the relationship between the sale proceeds, investment in the contract, and the surrender amount.
2019 Year-Specific Regulatory Updates
Effective Date Clarification
Section 6050Y reporting rules became effective for transfers of life insurance contracts occurring after December 31, 2017. The 2019 Form 1099-SB (Rev. December 2019) incorporates all final regulatory language published in October 2019 and removes placeholder or temporary guidance from earlier draft versions. Reportable death benefits paid after December 31, 2017, are also subject to these reporting requirements under separate provisions.
Calculation Requirements
Box 1 calculation must reflect the seller's investment in the contract as of the transfer date in 2019. No mid-year adjustment or annualization is permitted if the transfer occurs late in the calendar year. The calculation must be based on the information known to the issuer, or the issuer can reasonably estimate that as of the specific transfer date.
Contact Information Expansion
The issuer contact information section was expanded in the December 2019 revision to require a direct contact name and phone number. Issuers must provide this information even if it duplicates the primary issuer address to facilitate seller inquiries during the 2019 and subsequent filing seasons. This contact information must provide direct access to a person who can answer questions about the information return.
Reporting Scope
Form 1099-SB is filed only for reportable policy sales and transfers to foreign persons under Section 6050Y. Transfers that do not meet these statutory triggers are not reported on this form for 2019 tax year purposes. You may qualify for an exception if the seller is a foreign beneficial owner.
If you receive notice of a transfer to a foreign person but did not receive a written statement from an acquirer reporting the transfer as a reportable policy sale, or you received a written statement from an acquirer reporting your issuance of a life insurance contract in a section 1035 exchange as a reportable policy sale.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
