for valuable consideration rules (a) In general Subsection (a) of section 101 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (3) Exception to valuable consideration rules for commercial transfers (A) In general The second sentence of paragraph (2) shall not apply in the case of a transfer of a life insurance contract, or any interest therein, which is a reportable policy sale. (B) Reportable policy sale (i) In general For purposes of this paragraph, the term reportable policy sale means the acquisition of an interest in a life insurance contract, directly or indirectly, if the acquirer has no substantial family, business, or financial relationship with the insured apart from the acquirer's interest in such life insurance contract. (ii) Indirect acquisitions For purposes of clause (i), the term indirectly applies to the acquisition of an interest in a partnership, trust, or other entity that holds an interest in the life insurance contract unless— (I) the insured of the life insurance contract is an existing or former employee, officer, director, 5-percent owner, or independent contractor of the acquired entity or its subsidiaries or predecessors, and (II) no more than 50 percent of the gross value of the assets of the acquired entity consists of life insurance contracts or the parties demonstrate to the satisfaction of the Secretary that the acquisition of the life insurance is not the principal purpose of the acquired entity. (iii) Determination of gross value of assets For purposes of clause (ii), the term gross value of assets means, with respect to any acquired entity, the sum of— (I) in the case of assets of the acquired entity which are life insurance policies or annuity or endowment contracts, the unborrowed policy cash values of such policies and contracts, and (II) in the case of assets of the acquired entity not described in subclause (I), the adjusted bases (within the meaning of section 1016) of such assets. . (b) Conforming amendment Paragraph (1)