\u201cOfficer\u2019s life insurance premiums\u201d are not allowed as a deduction on a corporation\u2019s tax returns. Why is this? Is this one of those unfair tax rules?<\/p>\n
Well, when a corporation takes out a life insurance policy on one if its key employees \u2014 and the corporation is both the owner and beneficiary of the policy \u2014\u00a0the proceeds paid to the corporation upon the death of the employee are generally tax-exempt (I.R.C. \u00a7101). Because I.R.C. \u00a7101 serves to exclude life insurance proceeds from income, I.R.C. \u00a7264 prevents a second tax benefit by disallowing a deduction for any premiums paid on a policy on which the payor is the beneficiary. That way, the taxpayer doesn\u2019t get a deduction for premiums AND tax-exempt proceeds when the policy is paid out.<\/p>\n
The rules regarding COLI are complex. Did you know that there are special rules for COLI policies issued after August 17, 2006? Whereas under I.R.C. \u00a7101 the proceeds paid to the corporation upon the death of the employee are generally tax-exempt, the proceeds from corporate owned life insurance policies may<\/em>\u00a0be taxable to the corporation upon receipt<\/strong>. To avoid having life insurance proceeds taxable, certain notice and consent requirements must be met. I.R.C. \u00a7101(j) provides that life insurance premiums paid to a corporation upon the death of an employee will be excludable from income only to the extent of any premiums or other amounts paid for the policy.<\/u> Proceeds in excess of such costs will be taxable to the corporation<\/u>.<\/p>\n In order for the entire<\/em><\/strong> amount of life insurance proceeds to be tax-exempt to the beneficiary corporation, the employee must:<\/p>\n In addition, every applicable policyholder corporation owning one or more employer-owned life insurance contracts issued after August 17, 2006 must file a Form 8925 for each year such contracts are owned, showing:<\/p>\n If you want to discuss your business or personal tax planning<\/a>, tax preparation<\/a> and other financial concerns with an experienced tax professional, including how to adopt an age-weighted profit-sharing plan, we invite you to call 610-594-2601<\/a> today to make an appointment at our Exton PA CPA office<\/a> to discuss your situation. You can also schedule a consultation at Click Here<\/a>.<\/p>\n \u201cOfficer\u2019s life insurance premiums\u201d are not allowed as a deduction on a corporation\u2019s tax returns. Why is this? Is this one of those unfair tax rules? Well, when a corporation takes out a life insurance policy on one if its key employees \u2014 and the corporation is both the owner and beneficiary of the policy […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[58,3],"tags":[],"class_list":{"0":"post-2163","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-insurance-needs","7":"category-irs-tax-planning-ideas-tips-news","8":"entry"},"aioseo_notices":[],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9W9tf-yT","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts\/2163","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/comments?post=2163"}],"version-history":[{"count":4,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts\/2163\/revisions"}],"predecessor-version":[{"id":2203,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts\/2163\/revisions\/2203"}],"wp:attachment":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/media?parent=2163"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/categories?post=2163"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/tags?post=2163"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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Copyright \u00a9 2017 Keystone Financial Solutions, P.C.\u00a0 All rights reserved.\u00a0 BE SURE TO READ THE DISCLAIMER PAGE: Content in this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher of this blog makes no representations as to the accuracy or completeness of any information herein, will not be liable for any errors or omissions, and shall not assume liability for any losses, injuries, or damages from the display or use of this information.<\/strong><\/h6>\n","protected":false},"excerpt":{"rendered":"