LLC taxed as Sub S with father and son as owners. 1. Are premiums paid by LLC for key man insurance on the father with LLC as beneficiary deductible? 2. Are premiums on buy/sell funded by life insurance deductible?
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John -
Pardon My Ignorance
...but premiums on buy-sell what? What exactly is being bought or sold, or option thereof? Maybe the reader is supposed to know, but this one doesn't...
John I was in Asheville two weeks ago at the NCState "Intermediate" Seminar. Was reasonably good. Tennessee doesn't give a two-day seminar anymore, so I had to go to a neighboring state. I might go back there if things don't change.
Regards, Ron Jordan -
Ron,
What i was getting at was a buy/sell agreement between the owners, under which on the death of one, the life insurance proceeds would provide funds to buy the deceased owners equity portion of the business. There are two types of these, a "cross-purchase" where each owner is beneficiary to a policy on the other or one in which the company is beneficiary on policies on each owner. In the later case the proceeds are used by the company to buy back the decesed owner's equity in the business from his wife (or estate).
I don't know if under key man or either of the types of policies above if the premiums are deductible by the company.
Yea...the NC State seminars are usually good, especially at their price. I had a conflict this year and could not go.JohnComment
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No Answer
Three-P-Oh, sorry not to respond after you so elegantly brought forth the definition.
I simply don't know and must own up to being just as ignorant as I was before you responded. I hope others will offer an answer.Comment
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life insurance premiums
Seems to me that payment of these premiums benefit each shareholder only if the other dies. Hence it has nothing to do with "ordinary" or "necessary" for conduct of the
corporate business.
Holiday ChEAr$,
Harlan Lunsford, EA n LAChEAr$,
Harlan Lunsford, EA n LAComment
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It seems to me
that if the life insurance proceeds were paid on account of the death of one of the partners. And since life insurance proceeds are not taxable why would premiums be deductible?Comment
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No
Generally, life insurance is never deductible by anyone. However the only exception, for deduction, that I know is when it is a part of an employee group insurance and then the employee has taxable income (IRS chart) for amounts over $50,000 coverage.
Life insurance where the business is the beneficiary records premiums paid first to increase the asset on the books for "cash surrender value of Insurance" and the remaining premium as a non-deductible expense.Comment
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Originally posted by OldJack
And the group term premiums are included as compensation to scorp 2% or more owners.Comment
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Jack....
... you are 100% correct. At best, it can only be an asset on the balance sheet and only for the "cash value" being built up with each payment.This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
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