TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
         PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
 
Sec. 130. Certain personal injury liability assignments


(a) In general

    Any amount received for agreeing to a qualified assignment shall not 
be included in gross income to the extent that such amount does not 
exceed the aggregate cost of any qualified funding assets.

(b) Treatment of qualified funding asset

    In the case of any qualified funding asset--
        (1) the basis of such asset shall be reduced by the amount 
    excluded from gross income under subsection (a) by reason of the 
    purchase of such asset, and
        (2) any gain recognized on a disposition of such asset shall be 
    treated as ordinary income.

(c) Qualified assignment

    For purposes of this section, the term ``qualified assignment'' 
means any assignment of a liability to make periodic payments as damages 
(whether by suit or agreement), or as compensation under any workmen's 
compensation act, on account of personal injury or sickness (in a case 
involving physical injury or physical sickness)--
        (1) if the assignee assumes such liability from a person who is 
    a party to the suit or agreement, or the workmen's compensation 
    claim, and
        (2) if--
            (A) such periodic payments are fixed and determinable as to 
        amount and time of payment,
            (B) such periodic payments cannot be accelerated, deferred, 
        increased, or decreased by the recipient of such payments,
            (C) the assignee's obligation on account of the personal 
        injuries or sickness is no greater than the obligation of the 
        person who assigned the liability, and
            (D) such periodic payments are excludable from the gross 
        income of the recipient under paragraph (1) or (2) of section 
        104(a).

The determination for purposes of this chapter of when the recipient is 
treated as having received any payment with respect to which there has 
been a qualified assignment shall be made without regard to any 
provision of such assignment which grants the recipient rights as a 
creditor greater than those of a general creditor.

(d) Qualified funding asset

    For purposes of this section, the term ``qualified funding asset'' 
means any annuity contract issued by a company licensed to do business 
as an insurance company under the laws of any State, or any obligation 
of the United States, if--
        (1) such annuity contract or obligation is used by the assignee 
    to fund periodic payments under any qualified assignment,
        (2) the periods of the payments under the annuity contract or 
    obligation are reasonably related to the periodic payments under the 
    qualified assignment, and the amount of any such payment under the 
    contract or obligation does not exceed the periodic payment to which 
    it relates,
        (3) such annuity contract or obligation is designated by the 
    taxpayer (in such manner as the Secretary shall by regulations 
    prescribe) as being taken into account under this section with 
    respect to such qualified assignment, and
        (4) such annuity contract or obligation is purchased by the 
    taxpayer not more than 60 days before the date of the qualified 
    assignment and not later than 60 days after the date of such 
    assignment.

(Added Pub. L. 97-473, title I, Sec. 101(b)(1), Jan. 14, 1983, 96 Stat. 
2605; amended Pub. L. 99-514, title X, Sec. 1002(a), Oct. 22, 1986, 100 
Stat. 2388; Pub. L. 100-647, title VI, Sec. 6079(b)(1), Nov. 10, 1988, 
102 Stat. 3709; Pub. L. 105-34, title IX, Sec. 962(a), Aug. 5, 1997, 111 
Stat. 891.)


                            Prior Provisions

    A prior section 130 was renumbered section 140 of this title.


                               Amendments

    1997--Subsec. (c). Pub. L. 105-34, Sec. 962(a)(1), inserted ``, or 
as compensation under any workmen's compensation act,'' after ``(whether 
by suit or agreement)'' in introductory provisions.
    Subsec. (c)(1). Pub. L. 105-34, Sec. 962(a)(2), inserted ``or the 
workmen's compensation claim,'' after ``agreement,''.
    Subsec. (c)(2)(D). Pub. L. 105-34, Sec. 962(a)(3), substituted 
``paragraph (1) or (2) of section 104(a)'' for ``section 104(a)(2)''.
    1988--Subsec. (c). Pub. L. 100-647, in par. (2), redesignated 
subpars. (D) and (E) as (C) and (D), respectively, struck out former 
subpar. (C) which provided that the assignee does not provide to the 
recipient of such payments rights against the assignee which are greater 
than those of a general creditor, and as concluding provisions, inserted 
at end ``The determination for purposes of this chapter of when the 
recipient is treated as having received any payment with respect to 
which there has been a qualified assignment shall be made without regard 
to any provision of such assignment which grants the recipient rights as 
a creditor greater than those of a general creditor.''
    1986--Subsec. (c). Pub. L. 99-514 inserted ``(in a case involving 
physical injury or physical sickness)''.


                    Effective Date of 1997 Amendment

    Section 962(b) of Pub. L. 105-34 provided that: ``The amendments 
made by subsection (a) [amending this section] shall apply to claims 
under workmen's compensation acts filed after the date of the enactment 
of this Act [Aug. 5, 1997].''


                    Effective Date of 1988 Amendment

    Section 6079(b)(2) of Pub. L. 100-647 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to assignments 
after the date of the enactment of this Act [Nov. 10, 1988].''


                    Effective Date of 1986 Amendment

    Section 1002(b) of Pub. L. 99-514 provided that: ``The amendment 
made by this section [amending this section] shall apply to assignments 
entered into after December 31, 1986, in taxable years ending after such 
date.''


                             Effective Date

    Section 101(c) of Pub. L. 97-473 provided that: ``The amendments 
made by this section [enacting this section and amending section 104 of 
this title] shall apply to taxable years ending after December 31, 
1982.''

                  Section Referred to in Other Sections

    This section is referred to in sections 72, 5891 of this title.

From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 7, 2003]
[Document not affected by Public Laws enacted between
  January 7, 2003 and February 12, 2003]
[CITE: 26USC130]


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