WHAT IS REVENUE RULING 79-220?
It is the foundation of the structured settlement industry. In Revenue Ruling 79-220 the IRS held that in order for periodic payments to qualify in full for an income tax exemption under Section 104(a)(2), the recipient must have no ownership rights (actual or constructive) in the annuity contract purchased by the defendant to fund its periodic payments obligation. Any payments made to the estate after the recipient’s death are fully excludable for income tax purposes.
