By: Martin M. Shenkman, CPA, MBA, JD
Split-dollar is an arrangement under which the death benefit and the costs of life insurance are divided/shared between two different taxpayers. Split-dollar can be arranged between a corporation and its executive in a manner that provides for an insurance benefit to the employee; between a shareholder and corporation to provide a benefit to the shareholder; or between an individual and a family trust to provide a gift tax benefit, as examples. Regulations were issued in 2003 that govern most split-dollar arrangements occurring after the effective date of those regulations. Under these rules split-dollar arrangements are treated for tax purposes under either an economic benefit or a loan regime.
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