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If the stockholder is an employee of the corporation - in general - premiums for life insurance are tax-deductible - the corporation may deduct the premiums as compensation to the shareholders.
Life insurance would be considered as fringe benefits and if paid to a more than 2% shareholder should be treated as wages up to the amounts of a reasonable wages - and as such are subject of employment taxes.
However, if the corporation is a direct or indirect beneficiary under the life insurance policy covering an officer, employee or other key person - premiums are not deductible if the business is a direct or indirect beneficiary under the policy. Such premiums are not deductible, because life-insurance proceeds would not be included into taxable income.
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Sorry for delay.
Yes - you have correct understanding
if the S-corporation is a beneficiary - premiums are not deductible for either type of corporation because life-insurance proceeds would not be included into taxable income.
if the S-corporation is not a beneficiary - premiums are considered as compensation to a shareholder - and are deductible as such.
For C-Corporation - the life insurance premiums for its officers/employee are not deductible for the C Corporations. These payments are M-1 adjustments and is a difference between Book Income and Taxable Income.
- if S-corporation is a beneficiary - that would be S-corporation expenses - no need to report on the schedule M-1
- if shareholder is a beneficiary - that would in general be wage expenses for S-corporation - will be reported on W-2 to beneficiaries - no need to report on the schedule M-1
you may treat premiums as wages - but that should be employee's choice to pay premiums out of wages - in this case - employees pay premiums - not corporation.
Please forgive me the delay with the response.
P.S. If you want RD to address your request - I suggest to close this question and open another one requesting RD explicitly.