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
Work-related accident. Occupational accidents that injure employees are the responsibility of the employer and are covered by workers compensation insurance. In recent years, the term ...
Rights of employees who leave an employer with a qualified plan to withdraw their accumulated benefits. With a contributory plan, employees have immediate rights to their own contributions, ...
Same as term Insuring agreement: section describing coverages under a policy. Elsewhere in the policy other sections may restrict or exclude coverages. ...
Amount of life insurance required to purchase burial, probate, medical, and other costs associated with death. ...
Abuse by an insurer in an effort to avoid paying a claim filed by an insured, or to reduce the size of the payment. The national association of insurance commissioners (naic) has developed ...
One of four types of risks affecting the life insurance company as identified by the society of actuaries. This risk is associated with losses that the life insurance company may incur as ...
Group whole life insurance policy designed to reduce an employee's exposure to income tax on the value of life insurance provided by the employer. The policy separates the term element from ...
Periodic payments to an annuitant. ...
Same as term Master policy: single contract coverage on a group basis issued to an employer. Group members receive certificates as evidence of membership summarizing benefits provided. ...
Have a question or comment?
We're here to help.