Granted, if a surviving spouse receives the insurance (as well as if the policy was owned by the beneficiaries), it will also be tax freeAre you saying that life insurance proceeds are tax free only if the policy is owned by the beneficiaries?I got this from Publication 525:Life Insurance ProceedsLife insurance proceeds paid to you because ofthe death of the insured person are not taxableunless the policy was turned over to you for aprice. This is true even if the proceeds were paidunder an accident or health insurance policy oran endowment contract.Sounds to me that if the beneficiary owns the policy then it IS taxable.The question tax free from which tax.If the beneficiaries own the policy, it is generally not taxable for ESTATE tax purposes in the estate of the insured.For INCOME purposes, GENERALLY life insurance will be taxable if your only relationship to the insured is a economic one (you're not related), you bought the policy from the insured as in vitalic? ins. policy investments. If you have an insurable interest in the insured, it is not income taxable (the insured is a close relative, mother, father, child, grand parents, employess, etc)
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