Keyman policy proceeds and premium

by Guest » Tue Jan 20, 2009 09:56 am
Guest

Hi!

Someone please tell me whether the Keyman policy proceeds are taxable or not!

Are the premiums paid towards such policies (by employer) deductible?

Pinkfloydfan

Total Comments: 5

Posted: Tue Jan 20, 2009 11:26 am Post Subject:

Yes my friend..the premiums are deductible. The policy proceeds are certainly taxable. They are the receipts of the employer's trade. They are regarded as the compensation towards the profit losses. Dorris Day

Posted: Tue Jan 20, 2009 12:05 pm Post Subject:

Pinkfloydfan,

The premiums are NOT tax deductible and the death benefit is NOT taxable income on keyman life insurance, aka, Corporate Owned Life Insurance.

From the IRS: List of Nondeductible Expenses


Under the Internal Revenue Code ("IRC") dealing with life insurance benefits paid due to the death of the insured, the benefits are usually excluded from the taxable income of the beneficiary.

Because of the tax-free nature of death benefits, the IRC prohibits the deduction of the premiums paid for life insurance when the premium payor is also the owner of the insurance.



Dorris Day please cite the authority you are basing your statements upon and are you referencing USA law or some other country's law?

Posted: Tue Jan 20, 2009 01:30 pm Post Subject:

Dorris Day please cite the authority you are basing your statements upon and are you referencing USA law or some other country's law?


Gary..I'm a bit confused about the info that I came across over here-

The death benefit paid is most usually in the form of a lump-sum payment, which is received by the beneficiary TAX-FREE unless certain IRS rules have been violated



Again, I almost know for sure that in my place it is (Please check it out and see if you could explain it to me)-

business-protection.org.uk/keyman_insurance_taxation.html

It's important for all small traders like me to have a clear understanding of facts..
Dorris Day

Posted: Tue Jan 20, 2009 02:25 pm Post Subject:

Dorris Day your linky is for the UK not the USA.

business-protection.org.uk/keyman_insurance_taxation.html

That's why I asked:

"...are you referencing USA law or some other country's law?"



:P :wink: Pinkfloydfan didn't state whether he/she was from the UK, USA, India, Mexico, Canada, South Africa, Russia or the North Pole. :wink: :P

It would be extremely helpful if posters would state the country they're posting from or asking about AND if in the USA please say which state in the nation they're asking about.

Posted: Thu Aug 06, 2009 05:36 am Post Subject:

Gary has it right for us here in the US.

There are some creative strategies for dealing with the taxation.

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