The blended interest rate used to calculate taxable income on demand loan split dollar plans is falling to a historic low 0.82%. The new rate, effective from July 1, 2009 until June 30, 2010, makes those plans less expensive than ever before.
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Most people think life insurance is income tax-free. That is not the general rule for business life insurance that falls under rules Congress created in 2006. To keep it tax-free, you must first meet certain notice and consent requirements. Even then, the insurance can still be taxed if it is not paid in a way that satisfies one of the four ’safe harbors’ described in this article. If you own a business, consider this question. Will your bank, suppliers, and employees – and investors – feel more confident or less confident if the death of a key person is followed by a large infusion of cash into the business? Late last week the IRS provided some answers to questions about the 2006 law that taxes most of the death benefit of business-owned life insurance. IRS Notice 2009-48 answers many questions. It leaves others unanswered and raises yet others. If you own or advise a business, it’s important to know what employer-owned life insurance is and the rules you need to follow to keep the death benefit income-tax free. [Update: The IRS on May 22, 2009, released Notice 2009-48 that provides answers to many questions about employer-owned life insurance. See the article on this website for analysis of that Notice.] This article answers common questions about the Notice and Consent requirements you must satisfy to avoid paying tax on employer-owned life insurance. The last 5 [...] True or false? Life insurance is tax-free. The general income tax rule is that money received from life insurance when the insured dies is not taxable income (though it may be subject to state and federal death taxes). Congress, however, always likes exceptions to the rule and, in 2006, they created one huge exception to this [...] |
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