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
State operated insurance company used in workers compensation insurance in some states where the risks are so great that the commercial insurance companies cannot operate at affordable ...
Coverage for the insured's personal and real property and the insured's own person. Contrast with third party. ...
Plan wherein total withdrawal or income payments from tax deferred savings plans exceed $150,000 in any one year. An excess distribution tax of 15% of the amount greater than $150,000 must ...
Application of conventional terms and conditions to the reinsurance of a risk. Contrast with non-traditional REINSURANCE. ...
Right of one party to use land owned by another party. For example, an electric utility can obtain an easement through court action to place its power lines across someone's property, even ...
Type of inland marine insurance that covers pipelines. Although pipelines are stationary, the coverage is written on inland marine forms because they are considered part of the ...
Theory that the probability that two independent events will occur is equal to the probability that one independent event will occur times the probability that a second independent event ...
Coverage for an advertiser's negligent acts and/or omissions in advertising (both oral and written) that may result in a civil suit for libel, slander, defamation of character, or copyright ...
Method of premium payment under which a temporary premium is charged based on projected loss experience. At the end of the year this premium is adjusted to reflect the actual loss ...
Have a question or comment?
We're here to help.