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Quick question,

I had a whole life insurance acct through my former employer. They paid the premium, I got the life insurance benefit.


Generally if you owned the policy and your estate or a family member are the named benefiticary and it is not part of your employer sponsored qualifed retirement plan, because this is not Sect 79 Group Term, all of the mortality expense part of each premium the employer paid would be W2 income to you. You can see this by going back to the W2s you received each year and look in box 12, code C. If so, then when the policy is transferred to you, the cash value of the policy less the cummulative mortality expense you've paid to-date, should be W2 income to you....and I don't believe the employer would generate a 1099...but I'm not sure about this.

But if this is corporate owned life insurance (often referred to as a COLI), and you are premium sharing under a split dollar arrangement, where you defer compensation to pay the premium, then when the policy is transferred, the entire cash value should be W2 income.

What I'm uncertain about is whether the cash value or the replacement value of the policy is used in determining the W2 income amount.

I had the option of putting additional money in pretax for investment which I did. When I left the employer, I decided I didn't want to continue the policy so I took out the cash value which was less than my basis. I kept records to prove this. I was expecting a 1099 or some other tax document from the insurance company since this is pretax money but I haven't gotten any thing. Going through turbo tax, I was never asked about life insurance payouts. Is this not reportable income?

This is a guess, but the cash value of the policy is probably included in box 1 and 5 (and possibly 3 if your compensation is under 106,800 for 2009) of your W2 of the year of transfer.

BruceM
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