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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7073
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I am looking at $240,000 in taxable income as a result of

Customer Question

I am looking at $240,000 in taxable income for 2015 as a result of lapsed life insurance policies (the Adjustable Life type) - Ugh!!
Separately, I have a similar short term capital gains loss carry forward - roughly $240,000.
Is there a tax structure that combines the two so as to minimize the taxes due?
Submitted: 1 year ago.
Category: Tax
Expert:  Stephen G. replied 1 year ago.

Unfortunately no. Your lapsed life insurance policies should be reported as ordinary income as far as I know. I'm sure the Insurance Compan(y)/(ies) have already informed you of that? Your short-term capital loss may be used against capital gains and if not fully absorbed, the excess loss can only be used against ordinary income at the rate of $3,000. per year. I'm sure you know all that but there is no way to reclassify those two components so that they will offset.

Have you considered trying to have the Insurance Compan(y)(ies) re-instate a least a portion of the policies? If you were to pay down a portion of the policy loans and accumulated interest, perhaps you can get the polices re-instated. That would work to make a substantial reduction in the tax due on the lapsed polices.

Expert:  Stephen G. replied 1 year ago.

Just checking in to see if I can assist you further.

I see that you have had a chance to view my last series of comments.

Are you having a problem with our "star rating system" (it happens)? If so, you may just indicate your rating in words (ie. 5 stars, 4 stars, etc.) and then I may obtain credit for my efforts from Customer Service. Otherwise, I do not receive anything for my work with you, as we are only compensated for questions accepted by customers.

Thanks very much, Steve G.