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
Marine insurance contract clause that limits an insurance company's liability. The company agrees to pay only losses that exceed a percentage or flat dollar amount; partial (below this ...
Insurance company whose premium rates are usually below that of other insurance companies and the rating bureau. ...
Automatic nonproportional reinsurance treaty or automatic proportional reinsurance treaty that provides coverage for losses upon which claims are made while the treaty is in force, without ...
Limited number of payments, the first of which is due immediately, and payments thereafter are contingent upon the designated beneficiary (the annuitant) continuing to live. After the limit ...
Policy that combines life insurance coverage on two lives and pays policy proceeds on the second person's death with the accumulation potential of an underlying variable investment ...
Time that has elapsed between when claims actually occurred and when claims are actually paid. ...
Legislation designed to provide the structural reform necessary to strengthen the thrift industry after the bailout of the insolvent Federal Savings and Loan Insurance Corporation (FSLIC) ...
Coverage on an all risks basis for physical damage loss. Coverage applies to property damage to the insured boat or damage caused by the insured boat to a third party boat. Excluded perils ...
Business income coverage form that covers an insured business in the event that a manufacturer's operations are interrupted or suspended, thereby resulting in a monetary loss because a ...
Have a question or comment?
We're here to help.