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Revenue Code, the term “life insurance contract” means any
contract that is a life insurance contract “under the applicable
law”.4 Since this definition by its terms applies for all Code
purposes, we conclude that a “full-time life insurance salesman”
as that term is used in section 3121(d)(3)(B) is a person engaged
in the sale of “life insurance contracts” as defined in section
7702(a). The question then becomes whether the products that
petitioner sold were life insurance contracts under section
7702(a).
The parties dispute what meaning should be given to the
phrase “under the applicable law” as used in section 7702(a).
Respondent argues that “applicable law” means State law, in this
case the law of North Dakota. Petitioners do not directly offer
an interpretation of “applicable law”. Rather, they argue that
the Court should have the discretion to decide what counts as
life insurance, keeping in mind the broadly remedial purpose of
section 3121(d)(3)(B). Petitioners further argue that a
particular State should not have the power to affect the
definition of life insurance for purposes of Federal tax law.
Petitioners' concerns notwithstanding, we believe Congress
intended to incorporate State law for the definition of “life
insurance contract” for purposes of the Code, as evidenced by the
4 There are two alternative prerequisites in sec. 7702(a)
for qualifying as a life insurance contract that are not relevant
to the instant case.
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