Stock Purchase Agreement-S Corp.

[Bird Legs]

3 stockholders in S Corp. There is a stock purchase agreement where the corp.pays the
insurance premium and the S Corp. is the beneficiary. Upon the death, retirement,
of a stockholder, owner, then that stock is bought back by the corp. using the
insurance proceeds.
Now, the thinking is, they want to change this. The corp. would continue paying the
insurance premiums but the individual stockholders would be the beneficiaries.
Upon death, retirement, the insurance proceeds would go directly to the heir.
Recognizing that the premiums, in this scenario, would be taxable to the individual
stockholder, what would be the advantage of this scenario over the original stock
purchase agreement?
Thanks for all of your enlightened advice.
It is appreciated.

[JON]

Cash surrender

value is taxable to the insured-once the change is made....

[Bird Legs]

Insurance -Stock redemption

Jon, you say the cash value of the insurance is taxable to the beneficiary immediately
when the change is made? Even tho no money has been received by the beneficiary?
And the corp. is the owner of the policy?
I really do appreciate your response. This was something that I had not considered.

[JON]

The value of

the policy is transferred and a taxable event has happenned-unless they pay cash to the corporation. Transfer of a policy with value is a sale. Can be break even if the fair market value is paid. The only ones I have seen were given as a bonus and included their compensation and W-2. It is no different then having the stockholder take any other asset of the corporation.

[Bird Legs]

Jon-What is the

advantage of doing it this way, over the original corp. being the beneficiary & owner of the policy?
Again, I really appreciate your comments.