Learn how this act simplified the tax calculation rules for policy sellers.
For the past several years, many seniors have been hesitant to sell their life insurance policies because of a confusing revenue ruling in 2009 from the IRS.
This rule required policy holders to deduct the “Cost of Insurance” charges from their policy in order to determine an accurate tax basis.
Unfortunately, since it’s very difficult to obtain that precise data, many seniors simply concluded it was too much of a hassle and the tax consequences would be too great to go forward with selling their policy. Instead, they simply surrendered their policies and walked away from an asset of potentially greater value to them.
After several years of effort from our association, LISA (Life Insurance Settlement Association), and other concerned parties who sought to fix this outdated revenue ruling with permanent legislation, the new tax law includes just such a solution.
The law reverses the effects of that 2009 IRS revenue ruling and eliminates the need for taxpayers to obtain Cost of Insurance charges on their policies if they have opted for a life settlement. This common sense reform takes away an obstacle that stood in the way of many seniors who wished to sell their life insurance policies.
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Life Insurance Settlements, Inc. does not provide tax, legal or accounting advice. This email has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.