New Guidance on Private Placement Life Insurance
TOPIC: INVESTOR CONTROL DOCTRINE CAUSES CURRENT INCOME TAXATION ON INCOME AND GROWTH INSIDE PRIVATE PLACEMENT VARIABLE LIFE CONTRACT
CITATION: Webber v. Commissioner, 144 T.C. No. 17 (June 30, 2015); IRC Sections 72, 101(a), 817; Treasury Regulations Section 1.817-5.
SUMMARY: Jeffrey Webber established a grantor trust for his and his children’s benefit that purchased “private placement” variable life insurance policies insuring the lives of two elderly relatives. The IRS concluded and the Tax Court agreed that Jeffrey retained sufficient control and incidents of ownership over the assets in the separate accounts to be treated as owner for Federal income tax purposes under the “investor control” doctrine and therefore he was currently taxable on income and gains produced within the policies. However, the Tax Court refused to impose accuracy-related penalties against Webber. Read more…
