In a Revenue Ruling, the IRS has found that an S Corporation’s accumulated adjustments account (AAA) is not increased by insurance proceeds received by the corporation for the death of an employee if such proceeds are not taxable. Conversely, the Court also ruled that such accounts are not reduced by premiums paid on a life insurance policy by the company. In the set of facts considered by the
IRS, an S Corp bought life insurance on one of its highly paid executives. The company is the beneficiary and pays the premiums. In this situation, the IRS has ruled that the payment of the premiums does not reduce the company’s AAA and that any of the proceeds received by the company will be excludable from income and, thus, not increase the AAA.
Points of Interest
- All four documents provide you with the maximum amount of benefit when dealing with your estate.
- If you do not have a will at your death, the state will determine who gets your property!
- Benefits include avoiding probate court and its related expenses and keeping your estate private.
By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors