Tax Deductions for Sham Insurance Plan Disallowed

Topics: Estate planning

Deductions taken for premiums paid in complicated arrangements purporting to be business protection insurance policies (“BPPs”) were found to be neither necessary nor ordinary business expenses and were therefore disallowed. The arrangements did not cover insurable risks, did not shift risk, and did not distribute risk among a group of separate entities. In short, the…

Proposal to Modify the Tax Treatment of Corporate-Owned Life Insurance Continues to Receive Attention


The tax treatment of corporate-owned life insurance (“COLI”) continues to receive scrutiny from congressional tax writers and the Obama Administration. While progress toward reform of the Internal Revenue Code (“IRC”) may slow in light of the upcoming congressional midterm elections, a proposal that would indirectly impose a tax penalty on owners of COLI continues to…