Message Font: Serif | Sans-Serif
No. of Recommendations: 0
I need to file an ammended 1998 return to report a loss from cancellation of a Variable Universal Life Insurance policy. I have a basic question regarding which portion of the loss is deductible. Here goes ...

Invested $36,000 over 2 years. The broker fees (5%) totalled $1,800. The actual cost of the policy (i.e. approximately $50 per month over 2+ years) was $1500. The surrender charge was $3,200. I received a check for $27,000 at cancellation. The investment itself lost approximately $2,500 over the duration.

Initial investment: $36,000
Broker Fees: 1,800
Insurance Cost: 1,500
Surrender Fee: 3,200
Take home: 27,000

Ugh! What an investment! Live and learn.

I assume that all is deductible, including broker/surrender fees, except the actual cost of insurance. So, $36,000-27,000-1,500=$7,500 loss.

Am I on track here or am I overly optimistic?

Also, the dollars were initially placed into a fixed MM account and then distributed across several fine mutual funds over time, all of which performed as I would now expect, lousy. Do I need to identify the specific funds, or since they were under the VUL policy (and the VUL instrument is similar to an IRA in that funds can be moved in and out of various investments within the policy without tax implications), can I just specify the fixed MM account for tax purposes?

Any advice would be greatly appreciated.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.