Corporate Alternative Minimum Tax: Implications For Corporate-owned Life Insurance
INSURANCE tax that exhibits direct impact on the book income preference. Beginning with the year 1990, the book income preference became equal to 75% of the excess of current adjusted earnings of the alternative minimum taxable income (AMTI). Book income preferences are affected by corporate-owned life insurance in the following situations:
- If the insured dies, the excess of the life insurance policy's DEATH BENEFIT over the CASH SURRENDER VALUE becomes book income to the corporation.
- If the insurance policy's annual premium exceeds the increase in the cash surrender value for a particular year, the result is a decline in the book income and thus a decline in the corporation's exposure to the alternative minimum tax (AMT).
- Conversely, if the insurance policy's cash surrender value exceeds the increase in the annual premium for a particular year, the result is an increase in the book income and thus an increase in the corporation's exposure to the alternative minimum tax.
Generally, if the corporation in any given year has taxable income, corporate-owned life insurance results in an alternative minimum tax liability if a significant death benefit is paid to the corporation upon the death of the insured. The result is that the alternative minimum tax will cause a reduction in the net death benefit from the life insurance policy paid to the corporation.
Popular Insurance Terms
Division of a sum of money between a deferred annuity and an immediate life annuity certain. ...
Coverage on an all risks basis for loss due to theft or mysterious disappearance of personal property; damage to premises and property within resulting from theft; and vandalism and ...
Confirmation by an insurance company of the acts of its agent, regardless of whether or not these acts were committed within the limit of authority granted the agent by the company. By so ...
Arrangement in health insurance to discourage multiple payment for the same claim under two or more policies. When two or more group health insurance plans cover the insured and dependents, ...
Earned premium minus incurred losses plus loss adjustment expense plus other incurred underwriting expenses plus policy owner dividends. This income is generated from the insurance business ...
Endorsement to a property insurance policy providing all risks coverage for insured property. Excluded properties include residences, farms, and manufacturing properties. This endorsement ...
Same as term Dynamic: changing state of the economy associated with changes in human wants and desires such that losses or gains occur. Dynamic changes are not insurable. ...
Social insurance that provides benefits to temporarily disabled workers in a few states. Five states require employers to pay cash benefits if workers are disabled. They are Rhode Island, ...
Inquiry conducted by a committee of the legislature of the State of New York in 1905 that looked at abuses of life insurance companies operating in the state. This study led to stricter ...
Have a question or comment?
We're here to help.