What is TAMRA?
A. TECHNICAL AND MISCELLANEOUS REVENUE ACT OF 1988 is referred to as TAMRA. This act imposed additional limits on the funding of an insurance contract. If a policy is funded more rapidly than would be required by paying level annual premiums during its first seven years (7 pay premium limit), the policy is classified as a modified endowment contract (MEC). MECs retain the benefits of tax free death proceeds and tax deferred internal build-up of cash values; however, transactions such as loans, partial surrenders, or collateral assignments may be subject to taxes and penalties. Any amount distributed which is considered gain or interest is subject to current income tax. Also, there is a 10% tax penalty if the distribution is taken before the owner’s age 59 ½, except in the case of disability.
