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Regulation and Compliance > Federal Regulation > IRS

IRS Clarifies Life Settlement Rules

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IRSWASHINGTON - The Internal Revenue Service has clarified that life settlement funds will be subject to a 30 percent withholding tax  unless the funds are structured in a tax transparent manner where the investor is located in a jurisdiction with a relevant double tax treaty with the United States.

The IRS position was stated in a letter was requested by officials in Luxembourg after the IRS issued two Revenue Rulings,  IRS 2009-13 & IRS 2009-14 in May 2009  that confirmed the official position of the IRS on certain key tax issues as they related to the life settlement asset class.

This latest update reaffirms the original rulings, Luxembourg officials said.

The letter was requested by officials of the Carlisle Management Company, which created a Luxembourg Life Fund.

According to Jose Garcia, CEO of Carlisle Management Company, the letter confirms the decision of the Carlisle fund “to develop a new breed of life settlement fund that would incorporate market developments and tax compliance, as well as a structure that would stand the test of time.”

The product is an umbrella mutual investment fund that provides institutional investors with a tax compliant solution for the life settlement asset class.


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