Taxation of Business Owned Policies

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=90 BGCOLOR="#006699" TEXT="#080000" bgproperties="fixed" background="122285a1erlcgo.gif"> <div> <FONT SIZE="5" COLOR="#FFCC66" FACE="Arial" ><B>Lifetime Settlements</B></FONT><B>     |     </B><A HREF="index.htm" TARGET="_top" TITLE="Lifetime Settlements"><U><B>home</B></U></A><B>       </B><A HREF="id15.htm" TARGET="_top" TITLE="TABLE OF CONTENTS"><U>TABLE OF CONTENTS</U></A>   |   <A HREF="id54.htm" TARGET="_top" TITLE="GLOSSARY"><U>GLOSSARY</U></A>   |   <A HREF="id76.htm" TARGET="_top" TITLE="Review"><U>Review</U></A>   |   <A HREF="id55.htm" TARGET="_top" TITLE="FINAL EXAMINATION"><U>FINAL EXAMINATION</U></A></div> <div> back to  <A HREF="id44.htm" TARGET="_top" TITLE="Chapter 6: Taxation of Lifetime Settleme"><U><B>Chapter 6: Taxation of Lifetime Settlements </B></U></A></div> <div> </div> </td> </tr><tr> <td valign="top" width=210 BGCOLOR="#FFCC66" TEXT="#080000" background="121d2c00dkelyh.gif"> <div> <A HREF="mailto:instructor@wallstreetinstructors.com" TARGET="_top" TITLE="mailto:instructor@wallstreetinstructors."><U><IMG SRC="12caf630.gif" border=0 width="175" height="99" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></U></A></div> <div> <TABLE BORDER="2" CELLPADDING="2" CELLSPACING="1" WIDTH="158" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="BOX" RULES="ALL" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 16 ><NOBR><div> <A HREF="mailto:instructor@wallstreetinstructors.com" TARGET="_top" TITLE="mailto:instructor@wallstreetinstructors."><U>e-mail an instructor</U></A></div> </NOBR></tD> </tR> </TABLE></div> <div> <A HREF="id46.htm" TARGET="_top" TITLE="Taxation of Viatical Settlements"><U>Taxation of Viatical Settlements</U></A></div> <div> <A HREF="id47.htm" TARGET="_top" TITLE="Taxation of Senior Settlements"><U>Taxation of Senior Settlements</U></A></div> <div> <B>Taxation of Business Owned Policies</B></div> <div> <A HREF="id50.htm" TARGET="_top" TITLE="Chapter 6 Review Questions"><U>Chapter 6 Review Questions</U></A></div> <bR> </td> <td valign="top" height=390 BGCOLOR="#FFFFFF" TEXT="#080000"> <div> <B>Taxation of Business Owned Policies</B></div> <bR> <div> In this lesson on taxation, we have looked at the general rules regarding the income tax status of viatical and senior settlements. There is an exception to these general rules, however, that applies when a viatical settlement is made in a business situation. We noted earlier in this lesson that a viatical settlement made to an individual whose life expectancy is 24 months or less is received entirely tax free, regardless of the use to which he or she puts those funds. This significant tax advantage does not apply to certain business-related viatical settlements.</div> <bR> <div> The HIPAA tax benefits that make a viatical settlement tax free do not apply when the taxpayer receiving the viatical settlement proceeds has an insurable interest in the insured because the insured is the taxpayer’s: </div> <bR> <div> <IMG BORDER="0" SRC="Symb075c00b700f011111100.gif" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">director </div> <div> <IMG BORDER="0" SRC="Symb075c00b700f011111100.gif" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">officer </div> <div> <IMG BORDER="0" SRC="Symb075c00b700f011111100.gif" HEIGHT="16" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">employee </div> <bR> <div> Furthermore, these tax benefits do not apply when the insurable interest of the proceed recipient results from the insured’s financial interest in the taxpayer’s trade or business.</div> <bR> <div> Despite these exceptions for viatical settlements paid in a business environment, business-related viatical settlements still receive tax breaks. Any viatical settlement subject to that business exception will, nonetheless, enjoy the same capital gains treatment that applies to senior settlements. </div> <bR> <bR> <bR> <div> <TABLE BORDER="2" CELLPADDING="1" CELLSPACING="1" WIDTH="97" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="BOX" RULES="ALL" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" BGCOLOR=#FFCC66 > <tR> <tD VALIGN=CENTER HEIGHT= 38 WIDTH="87"><div> <A HREF="id50.htm" TARGET="_top" TITLE="Chapter 6 Review Questions"><U><B><U>NEXT</U></B></U></A></div> </tD> </tR> </TABLE></div> <bR> </td> </tr></table></body>