Cash Value Accumulation test in simple language

[kay2019]

Hi,

I have some insurance linked life insurance policies in a foreign country. I want to know if these are to be reported as taxable income. I read some document and it states that the policy should meet these requirements: 

1) Cash Value Accumulation Test

2) Guideline Premium Requirements, and fall within the IRC’s cash value corridor

Can someone give examples and explain what these mean? It will be good to show the premium paid, a surrender value and the total value (in case of death) in the example. Thank you very much.

[JohnB5677]

Cash value accumulation test (CVAT) is a test for determining whether a financial product can be taxed as an insurance contract rather than an investment. The cash value accumulation test is used to make sure that the cash value of the insurance policy does not exceed the present value of all future premium payments on the policy.

See Additional Info in Cash Value Accumulation Test

The Guideline Premium And Corridor Test (GPT) test is used to determine whether an insurance product can be taxed as insurance rather than as an investment. GPT limits the amount of premiums that can be paid into an insurance policy relative to the policy’s death benefit.

See Additional Info in  Guideline Premium and Corridor Test