Sec. 201 Tax treatment of income share agreements
Exclusion from gross income of income share agreement proceeds— Payments made under an income share agreement that complies with the requirements of section 103 to or on behalf of the individual who commits to pay a specified percentage of the future income of the individual to another person under such agreement, and any difference in value of the payments to or on behalf of such individual and the total amount paid by such individual, shall not be includible in the gross income of such individual for purposes of the Internal Revenue Code of 1986.
Treatment of payments of future income— Payments of future income received by another person under an income share agreement shall be treated for purposes of the Internal Revenue Code of 1986—
first, with respect to so much of such payments as does not exceed the amount of the payments to which subsection (a) applies with respect to the agreement, as a repayment of investment in the contract which reduces the basis of the holder in the agreement; and
second, as income on the contract which is includible in gross income.