Life insurance C corp shareholder

[KJ Judd]

Husband & wife shareholders of C corporation have individual term policies. Each is the beneficiary of the other's policy. I believe they own the policies (and not the corporation). Can the C corporation pay the premiums on the policies?

I thought paying life insurance premiums on shareholders was one of the benefits of C corp status. Or is this only if the corporation is the owner? However, I generally work more with LLC & S corps. When I starting research, I got more confused. Thanks for your thoughts.

[BOB W]

Life insurance

Only group term Life Insurance premiums are deductible. It looks like your clients just have plain old personal term life insurance that is not connected to the C Corp in any manner.

Group term is available to C, S and LLCs as well as Sole proprietors that have employees.

Life insurance is never deductible even in a cross purchase plan or any other buy out plan. Premiums are paid to an G/L asset account to account for the cash value increase in these type of policies. Off the top of my head I can't remember what happens to the non cash value part of the premium paid. Expensed, I don't think so.

[Unregistered]

It is not a tax free benefit for 2% or more shareholders in a SCorp.

[BOB W]

Never, Never....

Never.................

[KJ Judd]

And if C corp does pay ...

If the C corp does pay the premiums, nondeductible item on tax return. But is there any other impact? Such as considered a dividend to the shareholder?

[Bees Knees]

No, it is simply a non-deductible item on the return, just like the non-deductible portion of meals and entertainment.

It does, however, reduce E&P.

[JON]

C Corp

Corporations can have a plan covering everyone up to $50,000 with employees naming the beneficiaries, deductable by corp. If the corporation "owns" the policy the premiums are not deductable. If an employee is the owner and names the beneficiary I think the premiums are added to the salary as that is what it is this policy is for him and has nothing to do with the corp. Now comes the invented life insurance policies that give the corporation ownership to the extent of premiums paid etc -those are non deductable on the corp, but corp has to have some kind of a beneficial interest to be paying the prmiums not part of a corporate plan.