by jmlavallee » Tue Jun 30, 2009 07:32 pm
If a partnership, filing Form 1065, receives payment of death benefit on a keyman policy then disburses it to the remaining partner, is the partnership or the individual partner taxed?
Posted: Tue Jun 30, 2009 11:19 pm Post Subject:
jmlavallee you've mixed two different things into one question.
Keyman Life Insurance is usually on an important employee of the business where the businesss would suffer lost revenue if that person died.
A partnership buy-sell agreement would be between the owners of the business to buy out the deceased partners heirs.
In either event the death benefit is income tax free to the beneficiary.
Your statement....
If a partnership, filing Form 1065, receives payment of death benefit on a keyman policy then disburses it to the remaining partner, is the partnership or the individual partner taxed?
....is a bit convoluted. The REMAINING partner doesn’t keep those funds.
The SURVIVING PARTNER uses the death benefit to buy out the DECEASED PARNTNER's business interest from his heirs. Known as a Cross-Purchase Buy-Sell Agreement.
I'm purposefully keeping this simple by using a two person partnership.
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