account beneficiary or the account beneficiary’s spouse shall be included in the gross income of such beneficiary. (C) Additional tax on distributions not used for long-term care expenses The tax imposed by this chapter on the account beneficiary for any taxable year in which there is a payment or distribution from a long-term care account of such beneficiary which is includible in gross income under subparagraph (B) shall be increased by 20 percent of the amount which is so includible. This subparagraph shall not apply if the payment or distribution is made after the account beneficiary— (i) dies, (ii) becomes a terminally ill individual (as such term is defined in section 101(g)(4)(A)), or (iii) becomes a chronically ill individual (as such term is defined in section 101(g)(4)(B)). (4) Coordination with medical expense deduction For purposes of determining the amount of the deduction under section 213, any payment or distribution out of a long-term care account for long-term care expenses shall not be treated as an expense paid for medical care. (5) Transfer of account incident to divorce The transfer of an individual’s interest in a long-term care account to an individual’s spouse or former spouse under a divorce or separation instrument described in subparagraph (A) of section 71(b)(2) shall not be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest shall, after such transfer, be treated as a long-term care account with respect to which such spouse is the account beneficiary. (6) Treatment after death of account beneficiary (A) Treatment if designated beneficiary is spouse If the account beneficiary’s surviving spouse acquires such beneficiary’s interest in a long-term care account by reason of being the designated beneficiary of such account at the death of the account beneficiary, such long-term care account shall be treated as if the spouse were the account beneficiary. (B) Other cases (i) In general If, by reason of the death of