Corporate Owned Life Insurance Proceeds

[Markey]

s About Taxes)/Corporate Owned Life Insurance Proceeds Advertisement Expert: Dan Lively, Esq., LLM(Tax), CPA - 11/4/2009 The LLC is taxed as a corporation.  The LLC is the owner and beneficiary of the life insurance policy on a shareholder.  The LLC received life insurance proceeds for the death of an officer/shareholder.  For book purposes do the proceeds get booked as income, even though they are not taxable?  Is there any other scenario where proceeds would not be booked as income?  Where could I look to find proof for this(code sec., revenue bulletin)?

[Dickie]

Under Internal Revenue Code Section 101, Proceeds of life insurance contracts payable by reason of death are specifically excluded from income. The journal entry when you receive the proceeds from the policy on the books of the LLC are as follows:                   Dr.  Cash(for amount of proceeds received)                   Cr.  Cash Value of Life Insurance Policy(if booked on balance sheet)                   Cr.  Non-Taxable Income

Since this is non-taxable income it is reported as such.

Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.