Tax questions please?

Question

How do we treat the the premium that the buyer had paid for it if that person died and then the insurance company iussed the check for the beneficiary?
For example, the buyer paid 3100 for the insurance and then the buyer died, the insurance company issued the check for 14,643 for the beneficiary(included 14,000 on proceeds and 643 in interest), obviously 643 is taxable, but how do treat the 3100 that the buyer paid for the premium?
Thanks

Answer 1

Life insurance proceeds are tax free. You are correct that the interest is taxable. What was paid for the policy isn't income or a deduction since the proceeds are not taxable.

Answer 2

Generally, if you receive the proceeds under a life insurance contract because of the death of the insured person the benefits are not taxable income and do not have to be reported. Any interest you receive would be taxable and would need to be reported just like any other interest received.

However, if the policy was transferred to you for valuable consideration, the exclusion for the proceeds is limited to the sum of the consideration you paid, additional premiums you paid, and certain other amounts. There are some exceptions to this rule. For additional information, call the IRS at 1 800-829-1040.

Answer 3

usually interest is taxable if proceeds are paid out periodically (not all at once)
As someone else already said, expense could only be deductible from taxable income. Since proceeds aren't taxable neither are the premiums.
Another view:
The proceeds includes the return of the original premium paid & is therefore not an expense.
So the real benefit excluding interest is only 10900 (14,000 less the 3100 premium)

Answer 4

Life insurance proceeds are non-taxable so life insurance premiums are non-deductable.