Question for the Money Doctors
Question submitted on Sep 20, 2011.
QuestionI have a partnership that has paid premiums on a buy sell insurance policy with the partner as the insured and the partnership as the beneficiary. The premiums have always been deducted on the partnership tax return. Are the insurance proceeds taxable or is there a cure that will allow the proceeds to be tax free even though the prior years premuiums were deducted.
The only cure of which I am aware is to file amended partnership returns for the years that are still open under the statute of limitations, which is probably three years. Then the partners would file amended returns as well and report the amended income allocation. There is no cure whereby the life insurance proceeds would be taxable.
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