February 25, 2021

Alfetherlin On HubPages

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One of the fastest growing home based businesses is pet care. Another planning opportunity for...

One of the fastest growing home based businesses is pet care. Another planning opportunity for partnership-owned life insurance deals with buy-sell agreements. Buy-sell agreements for corporations with more than two shareholders create several potential problems. First, with the popular cross-purchase or wait-and-see buy-sell agreement (so that the surviving shareholders receive a stepped-up basis in their shares and a C corporation avoids paying the Alternative Minimum Tax), either a trusteed buy-sell business plan arrangement must be used or multiple policies must be purchased (i.e., each shareholder must own a policy on each other shareholder’s life). For example, with four shareholders, you would need 12 policies. Second, a transfer-for-value may occur at the death of a shareholder as the deceased shareholder’s interests in the surviving shareholders’ policies are purchased by the surviving shareholders. If so, a portion of the insurance proceeds will be subject to income taxes. IRC Section 101(a)(2).