Help with a Key Man policy

May 13, 2019

  1. nstok22
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    nstok22 New Member

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    I've got a small business owner interested in a rop term- if the policy is written on him and paid for by the business the premiums are tax deductible from what I understand, my question is at the end of the term does the ROP amount come back to the owner tax free?

    Thanks!!
     
    nstok22, May 13, 2019
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  2. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    Not deductible, unless you want the proceeds to be taxable.

    David_H_Kinder_ChFC__May_13th_2019_1037582.jpg David_H_Kinder_ChFC__May_13th_2019_1037583.jpg
     
    DHK, May 13, 2019
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  3. nstok22
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    nstok22 New Member

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    Thank you!
     
    nstok22, May 14, 2019 at 8:29 PM
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  4. Markthebroker
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    Markthebroker Guru

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  5. bill3173
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    bill3173 Guru

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    Yes because you didn't pay taxes on the premiums, so you pay ordinary income tax when they're returned to you.
     
    bill3173, May 15, 2019 at 6:24 AM
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  6. scagnt83
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    scagnt83 Worldwide Expert of Everything

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    The ROP portion is received tax-free assuming the premium was not deducted.

    If the business did not deduct premiums, it means the premiums were already included in taxable income.

    But as DHK posted, if Premiums are deducted, the DB will be taxable.
     
    Last edited: May 15, 2019 at 9:41 AM
    scagnt83, May 15, 2019 at 8:52 AM
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  7. Benefits Guy
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    Benefits Guy New Member

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    Not deductible at all.

    I think you guys are confusing this with the way the IRS handles deductions for D.I.
     
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