NU Online News Service, July 23, 2003, 5:03 p.m. EDT – The Treasury Department and the Internal Revenue Service issued two revenue rulings today aimed at stopping what it calls “abusive” uses of life insurance and annuity contracts to avoid taxes.

The Internal Revenue Code provides for the deferral of taxes on earnings from life insurance and annuity contracts.

The new rulings criticize the sale of life insurance and annuities wrapped around other investments to help investors avoid current taxation on earnings, rather than primarily to provide consumers with life insurance protection or a means of saving for retirement.

Revenue Ruling 2003-91 and Revenue Ruling 2003-92 ban the purchase of life insurance and annuity contracts primarily for tax-avoidance purposes.

“These revenue rulings are an important step in the Treasury Department’s ongoing efforts to prevent taxpayers from using insurance products and insurance companies as a means to shelter income from current taxation,” the Treasury Department says.