### Question
Can you define what modified endowment contract means?


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

> 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**

