Discussion:Key-Person Life Insurance
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Discussion Forum Index --> Tax Questions --> Key-Person Life Insurance
| 27 July 2006 | |
| Does anyone know of any restrictions on key-person life insurance designed to help the company re-hire key employees? I think the only thing is that the policy has to be in the company name and the beneficiary.
Jeff | |
| 28 July 2006 | |
| I read in publication 535 that "life insurance covering your officers and employees [is deductible] if you are not directly or indirectly a beneficiary under the contract. I guess the question is - "what are the definitions of directly & indirectly"? Would someone be a beneficiary if they were the sole shareholder yet died, even if the company itself was listed as the beneficiary? | |
| 28 July 2006 | |
| Hi if the company or taxpayer is the bene not deductible if the employee is bene then taxable compensation. bye | |
| 30 July 2006 | |
| Swflacpa, an example of an indirect beneficiary would be a corporation that would receive the proceeds of life insurance from a beneficiary in a buy-sell agreement (such as a stock redemption). | |
| 5 August 2008 | |
| Riley2, if the company is not directly or indirectly the beneficiary the premiumns would be deductible if in the nature of compensation. Do you have any cite for this? The only reference I have to this is to CCH Federal Reports which I do not have.
Many thanks. | |
| 5 August 2008 | |
| Revenue Ruling 2008-42 | |
| 6 August 2008 | |
| Dennis,
Thanks very much, but the situation is a C corp pays the premiums of a life insurance policy on an officer with the officer's wife as beneificiary. Amount of premiums paid are included in the salary of the officer. The deduction has been disallowed to the C Corp based on form over substance. Thanks again. | |
| 6 August 2008 | |
| While the citation is specific to an S, the analysis of the underlying law is quite good and applies universally. I don't quite understand a denial of deduction for compensation. | |
RoyDaleOne (talk|edits) said: | 6 August 2008 |
| I have notice lately that a number of Rulings, Procedures, and PLR, that I think are incorrect in there application. Seems that the current people at the IRS don't know what has gone on in the past. | |
| 6 August 2008 | |
| The IRS doesn't seem to be taking into consideration the fact that if the compensation/insurance premium deduction is disallowed, the corporation can amend the recipient's W-2 and he can get a refund - assuming as is required, that the premiums were included on his W-2.
If they weren't the IRS probably should be requiring that the payroll tax filings be corrected. Or, perhaps they're asserting that the premiums are constructive dividends, if the officer is a shareholder. | |
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