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About Dan Lively
Expertise
I can answer questions regarding personal, corporate, partnership, estate and gift taxes. These questions can relate to problems, compliance, or planning. I am well versed in IRS audit and collection procedures and can respond to questions you may have in this area as well.

Experience
I am an attorney in the state of CA that is certified as a tax specialist by the State Bar of California Board of Legal Specialization. I am also a Certified Public Accountant, and have an LL.M in Taxation. Further, I am an adjunct professor of taxation at Whittier College of Law.

Organizations
Orange County Bar Association American Bar Association Orange Coast Estate Planning Counsel American Association of Attorney/CPA's California Bar Association

Publications
Apartment Journal Taxing Advice California CPA Journal

Education/Credentials
LL.M (Taxation) - Chapman University College of Law JD (Law) - Western State University College of Law BS (Accounting) - California State University, Northridge

Awards and Honors
• American Jurisprudence Award – Federal Taxation • American Jurisprudence Award – Wills • American Jurisprudence Award – Estate Taxation • Cal Jur Award – Partnership Tax • Cal Jur Award – Corporate Tax • Cal Jur Award – Tax Procedure

You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > Corporate Owned Life Insurance Proceeds

Tax Law (Questions About Taxes) - Corporate Owned Life Insurance Proceeds

Expert: Dan Lively - 11/4/2009

Question
The LLC is taxed as a corporation. The LLC is the owner and beneficiary of the life insurance policy on a shareholder. The LLC received life insurance proceeds for the death of an officer/shareholder. For book purposes do the proceeds get booked as income, even though they are not taxable? Is there any other scenario where proceeds would not be booked as income? Where could I look to find proof for this (code sec., revenue bulletin)?

Answer
Under Internal Revenue Code Section 101, Proceeds of life insurance contracts payable by reason of death are specifically excluded from income. The journal entry when you receive the proceeds from the policy on the books of the LLC are as follows:

                  Dr. Cash (for amount of proceeds received)
                  Cr. Cash Value of Life Insurance Policy (if booked on balance sheet)
                  Cr. Non-Taxable Income

Since this is non-taxable income it is reported as such.

Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.

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