Magazine article The CPA Journal

Deduction Denied for Contribution of a Life Insurance Policy to Charity - A Good Idea Turned Bad

Magazine article The CPA Journal

Deduction Denied for Contribution of a Life Insurance Policy to Charity - A Good Idea Turned Bad

Article excerpt

In PLR 9110016 the IRS considered a case in which a taxpayer intends to apply for a life insurance policy and to name a Sec. 501(c)(3) charity as the sole beneficiary of the policy proceeds. The taxpayer plans to assign the policy to the charity and continue to pay the premiums on the policy. The charity is unable to purchase the policy directly, because under New York law it does not have an insurable interest in the taxpayer's life.

The IRS ruled that because under local law the executor may challenge the payment of the proceeds to the charity after the taxpayer's death, the taxpayer's payment of the policy premiums will not qualify for the Sec. 170 charitable contribution deduction. The IRS also noted that the taxpayer was under no obligation to pay the policy premiums and, in that event, the gift would lapse due to failure to pay the premiums.

The IRS ruled that the proposed transaction would not qualify for the Sec. 2522 gift tax charitable deduction for the same reasons it fails to qualify under Sec. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.