- Thread starter
- #11
Arthur Rudnick
Guru
- 1,652
Lastly, this statement is ludicrous:
My gut tells me that there's some tax ramification involved. "Common sense says you can't take a $20,000 credit when in actuality, a net $80,000 premium would only generate a tax-credit of $16,000.
That happens all the time. My heirs will get my life insurance death benefit for free. My death benefit is A LOT lower than the sum total of my premiums paid."
YOUR statement is ludicrous!
Obviously, the IRS tax-code allows for death benefits from life insurance policies to be paid tax-free. I didn't say it, the IRS said it.
There are 2 points I'm trying to make:
1) Agreed, the tax code does not specifically say that benefits paid from a non-TQ policy are to be considered taxable income.
What the tax-code does say is that benefits paid from a TQ policy is to be considered non-taxable.
To date, there has never been a lawsuit where the IRS has had to make a decison on the tax status of non-TQ policies.
The only thing that you can be sure of is that benefits on TQ are non-taxable.
2) I would guess that a person cannot take a deduction or tax-credit for more that he/she is entitled to.
The fact that a 1099 is not issued for a ROP payment, does not necessarily mean that by law, the return of premium should not be reported. I did not say that a ROP was income, what I implied was that common sense says that you can't claim a deduction or a tax-credit for more that you're entitled to. And that would be the issue in this case.
If I split a case with you and paid you a commission which I did not report as expenses paid on my taxes and you did not report as income received, chances are pretty good that that we'd get off SCOTT free.
But, that doesn't mean that if we somehow got caught that you and I wouldn't be sharing a prison cell together for the next 10 years. (I want the top bunk)
Now, that's something to think about, isn't it?
My gut tells me that there's some tax ramification involved. "Common sense says you can't take a $20,000 credit when in actuality, a net $80,000 premium would only generate a tax-credit of $16,000.
That happens all the time. My heirs will get my life insurance death benefit for free. My death benefit is A LOT lower than the sum total of my premiums paid."
YOUR statement is ludicrous!
Obviously, the IRS tax-code allows for death benefits from life insurance policies to be paid tax-free. I didn't say it, the IRS said it.
There are 2 points I'm trying to make:
1) Agreed, the tax code does not specifically say that benefits paid from a non-TQ policy are to be considered taxable income.
What the tax-code does say is that benefits paid from a TQ policy is to be considered non-taxable.
To date, there has never been a lawsuit where the IRS has had to make a decison on the tax status of non-TQ policies.
The only thing that you can be sure of is that benefits on TQ are non-taxable.
2) I would guess that a person cannot take a deduction or tax-credit for more that he/she is entitled to.
The fact that a 1099 is not issued for a ROP payment, does not necessarily mean that by law, the return of premium should not be reported. I did not say that a ROP was income, what I implied was that common sense says that you can't claim a deduction or a tax-credit for more that you're entitled to. And that would be the issue in this case.
If I split a case with you and paid you a commission which I did not report as expenses paid on my taxes and you did not report as income received, chances are pretty good that that we'd get off SCOTT free.
But, that doesn't mean that if we somehow got caught that you and I wouldn't be sharing a prison cell together for the next 10 years. (I want the top bunk)
Now, that's something to think about, isn't it?
