The commitment to insurance revenues is reduced. Under Section 101 (a), the receipt of life insurance products is not subject to income tax unless the policy is transferred for a valuable consideration. When a policy is transferred against a consideration in value, the purchaser (new owner) recognizes as taxable income the difference between (1) the amount of death benefits paid to the new owner after the death of the insured and (2) the amount paid for the acquisition of the policy and subsequent premiums paid by the new owner. Suppose X pass on a policy about X`s life to YY in exchange for $100,000. It will then pay $US 100,000 in premiums before cashing in $1 million in insurance revenue. It would cover $800,000 in taxable income ($1 million minus $200,000). While there does not appear to be a logical reason to exempt the transfer of a period of interest rate setting to life insurance and between the partners of the insured and not to grant this exemption from assignments to partners and among closely held partners, the insured may, unless the purchaser is uninsured, easily violate the rule of the transfer of policies from a partner to a shareholder and transfers among shareholders. 3. if the agreement is applied consistently to other business interest transactions; An involuntary transfer of value may also take place in the event of the death of a shareholder.
Suppose S, A and T are equal shareholders. Each shareholder owns and beneficiaries of a policy on the standard of living of the other two shareholders. Suppose T dies and T`s estate sells the T to A and S shares, increasing their percentage in the business. T`s Estate also sells the policy on life from A to S and the policy on life from S to A; This will provide the remaining shareholders with additional assurance to acquire the increased shares of the rest of the shareholder in the company. This strategy also seems to be a good idea. However, the parties generated a transfer of value through this transaction. Book value. The book value attributes the total capital to the allocation of the stock of shares in accordance with the balance sheet of the entity of the stock to be evaluated.