Is the Life Insurance premium paid by the company to insure the life of the Director of the company, a deductible expense ? Is the amount of Premium so paid by the company, taxable in the hands of the Director ?
Actually, the life insurance premium paid by the company to insure the life of any executive or owner of the company is not deductible on the Corporation tax return. Technically, this item is sometimes referred to an M-1 item adjustment.
This means is that the life insurance deduction taken on the books is added back into income for tax purposes and is reported as an adjustment to the book income on Schedule M-1. Per IRS tax rules, the premiums are not deductible on the Corporation tax returns.
The premium paid by the company is not considered income to the Officer or Director if the beneficiary of the policy is the corporation or company as is the case in most key man life insurance policy.
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