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Many people are confused with IRS form 712 - http://www.irs.gov/pub/irs-pdf/f712.pdf . Form 712 is mainly used in Life Insurance Statement which involves a decent receiving the policy benefits after the primary policy holder's death. The IRS Form 712 is a statement that provides Life Insurance Policy values as of the date of an insured's or policy owner's death. The IRS requires that this statement be included when an estate tax return is filed. This information is generally required for valuation of the estate.
Please be aware that there is no federal estate tax for decedents died after Dec 31, 2009.
Please also see for reference IRS publication 525 - www.irs.gov/pub/irs-pdf/p525.pdf - page 21 - left column.
Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract.
So - you do not need to include the life insurance proceeds into your taxable income.
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