INTERIM GUIDANCE FOR SPLIT-DOLLAR LIFE INSURANCE.

• Author: Josephs, Stuart R.
• Position: Brief Article

IRS Notice 2001-10, Jan. 9, provides interim guidance for split-dollar life insurance arrangements between employers and employees.

The IRS generally will accept the parties' characterization of the employer's payments under a split-dollar arrangement as long as the characterization is consistent with the substance of the arrangement, has been followed consistently from inception, and fully accounts for all the economic benefits conferred on the employee.

The IRS will permit an employer's payments under a split-dollar arrangement to be characterized as loans for tax purposes, provided that all of the conditions set forth above are satisfied. In such cases, the tax consequences of the payments treated as loans will be determined under Sec. 7872; the employee will not have additional compensation income for the value of the insurance protection provided under the life insurance contract; and the cash surrender value...