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Old 04-18-2008, 02:14 PM
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Question regarding life insurance policy

Hi Tax Guru,

I don't generally prepare 1041 returns, but a friend really wanted my help. I don't want to steer her wrong, and I have a question regarding a 1099R they received and all my research has provided few clues. My friend's father had a living trust (no spouse) and he passed away in 2007. As trustee, she filed for an EIN for the trust. She received a 1099R from a life insurance company with a taxable portion of the distribution and the recipient's ID# is her father's SS#. The policy was in the name of the father's living trust, which now has its own EIN. Don't I report this income on the 1041? If so, how do I address the issue of the recipient ID # being different from the trust's ID#? Any guidance would be greatly appreciated.

Thanks for being a great resource!



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Old 05-05-2008, 11:40 PM
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My understanding is that Life Insurance proceeds are generally exempt from taxation.

Another point, only the earnings from the proceeds such as interest income or dividends from these proceeds are subject to tax. The corpus should not be taxable!

Thirdly, the Trust has its own EIN# and the income should be reported on this trust tax return. Remember, the proceeds are not taxable!

I hope this helps you!

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