Life Settlement Sales May Be Taxed as Capital Gains, IRS Rules
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Seniors who sell their life insurance policies in the life settlement market may be able to treat a portion of the proceeds as capital gains rather than ordinary income, according to an Internal Revenue Service ruling.
The ruling last month follows a request by Senator Herbert Kohl, a Democrat from Wisconsin who is chairman of the Senate Special Committee on Aging. It allows the seller of a life insurance policy to treat the proceeds as capital gains minus the cost basis, said Mitch Freedman, a Sherman Oaks, California-based certified public accountant and financial adviser.