by Roger364 » Wed Dec 04, 2013 06:02 pm
A wife was owner and beneficiary of policy on life of husband. Policy initially taken out in 2001 with husband as owner. Ownership transferred to wife three months ago. Husband owned a c-corp and the corp. paid the premiums on the policy but did not deduct premium on the business return. Premiums were never treated as compensation or dividend to husband. Husband died and wife will receive proceeds. Will the proceeds be taxable to her?
Posted: Wed Dec 04, 2013 07:04 pm Post Subject:
Husband owned a c-corp and the corp. paid the premiums on the policy but did not deduct premium on the business return. Premiums were never treated as compensation or dividend to husband.
There is something inherently wrong here. If the husband or wife owned the policy, what was the reason for the corporation to pay premiums?Unless this was part of a split dollar plan, I see no reason for the corporation to have been paying the premiums. And even then, the premium for the excess insurance over $50,000 is supposed to be attributed to the insured/owner as imputed income to avoid the problem you are asking about.
Sounds to me like someone received a taxable benefit without paying the tax. If this is true, the death benefit could be taxable in whole or in part. Or taxes and penalties will be due on unreported income.
The question is, will the IRS ever find out? Probably not. But the wife needs the help of a professional tax adviser.
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