Summary
Taxation of life insurance policy exchanges is discussed. Sec. 1035(a)(1) holds that no gain or loss is incurred when one life insurance contract is exchanged for another. To insure exemption, rights should be assigned to the new carrier by the policyholder. However, changing the insured on the same policy, as in corporate-owned life insurance (COLI), is considered a taxable exchange under Sec. 1001.
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Extract
Life insurance policy exchanges.
Recent publicity regarding bankruptcy filings by major life insurance companies has prompted reviews by policy owners of the financial stability of insurance carriers. In some cases the policy owners may wish to exchange existing pol...
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