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Cross Border Insurance - United States - 7702 and 7702A

What is Section 7702?

§7702 and §7702A of the U.S. Internal Revenue Code defines what the federal government considers to be a legitimate life insurance contract and determines how such contracts are to be taxed.


Three classes of contracts result:

  • Life insurance – A “non-MEC” contract—one that fulfills all the requirements of both §7702 and §7702A—receives all the traditional tax benefits of life insurance.
  • MEC – A modified endowment contract (MEC) meets the requirements of §7702, but not §7702A. Gain in a MEC is still shielded from taxation as long as it’s realized through death, but distributions are subject to LIFO taxation and may incur an excise penalty.
  • Not insurance – A policy that doesn’t meet the requirements of §7702 isn’t life insurance at all for federal tax purposes.


When to get Cross Border testing?


  • U.S. citizen living in Canada with a U.S. issued policy - US citizens are subject to US tax rules, no matter their country of residence. 
  • U.S. citizen living in Canada with a Canadian issued policy

Cross Border Life Insurance

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