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March 1, 2022

Tax Court determines tax consequences of decedent's split-dollar life insurance arrangements with premiums paid by her revocable trust

In Estate of Marion Levine, et al. v. Commissioner (158 T.C. No. 2), the Tax Court has held that a decedent who had entered into split-dollar life insurance arrangements that required her revocable trust to pay the policies' premiums, possessed a receivable created by the arrangements. The Court also concluded that (1) IRC Sections 2036(a)(2) and 2038 do not require the policies' cash surrender values to be included in income because the decedent had no right to terminate the policies; and (2) IRC Section 2703 applies only to property interests the decedent held when she died.