Death Benefits Excluded

Death benefits, accidental death benefits, burial benefits, and death benefits payable from an employee welfare benefit plan to a retiree on a spouse's death constitute excludable insurance contract benefits according to the IRS’ PLR 200002030.

This determination was made when an issue involving an employee who received benefits under a collective bargaining agreement from an employer-established welfare benefit plan arose. The plan would pay the following benefits: an accidental death and dismemberment award, a death benefit, a burial benefit, and a death benefit payable to a covered retiree on the death of a spouse.

The IRS sought to define “life insurance contract” under Sec. 7702 in an effort to determine if the contracts would be handled as a life insurance contract. Because the Sec. 7702 definition of a life insurance contract did not apply, the IRS turned to Federal case law for clarification. Using Sec. 7702(a) and federal common law, the IRS ruled that the death benefits were paid under a life insurance contract. The death benefit contract satisfied the cash value accumulation test under Sec. 7702(a) since there was no cash surrender value to the benefits. Since the death benefits were received under a life insurance contract, they were excludable from income under Sec. 101(a).

You may like these other stories...

Treasury prepares options to address tax inversionsDamian Paletta of the Wall Street Journal reported on Monday that US Treasury Department officials are assembling a list of administrative options for Treasury Secretary...
Deloitte CEO Joe Echevarria to retire to pursue public serviceMichael Rapoport of the Wall Street Journal reported that Deloitte LLP CEO Joe Echevarria plans to retire later this month to pursue his interest in public...
If your clients include retailers, pending federal legislation allowing states to tax Internet sales could mean big changes in the way they process and account for their sales and use taxes.In July, the Marketplace and...

Already a member? log in here.

Upcoming CPE Webinars

Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.
Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.