Life insurance used to purchase shareholder stock, how does C-Corp handle this situat

[CalR]

What is the taxability of the following situation to the corporation? C-Corp purchases stock from an officer shareholder, using life insurance policies on shareholders life that the corporation had paid premiums on. The premiums paid were not deducted by the corporation. Dividends were used to pay up additions. No income or expense was recorded by the corporation.

[Burke]

Based on the limited information given here, the proceeds should be tax-free to the corporation, but there can be AMT issues in certain situations. This appears to be key-man insurance.