of a senior health planning account which is not used to pay the qualified health care expenses of the 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 qualified health 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 senior health planning 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 senior health planning account for qualified health 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 senior health planning 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 senior health planning 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 senior health planning account by reason of being the designated beneficiary of such account at the death of the account