### Question
How is the term modified endowment contract defined?


### Answer
The term **modified endowment contract** is defined in *26 U.S.C. § 7702A* as the following:

> any contract meeting the requirements of section 7702—


(1) which—


(A) is entered into on or after June 21, 1988, and


(B) fails to meet the 7-pay test of subsection (b), or


  

(2) which is received in exchange for a contract described in paragraph (1) or this paragraph

#### Citation:
  - *26 U.S.C. § 7702A*
  - Heading: **Subtitle F-Procedure and Administration > CHAPTER 79-DEFINITIONS**

