Tax Facts

123 / Are there any penalties that can be imposed upon a charitable institution in connection with a gift of life insurance where a deduction is not allowable?

A charitable organization that pays premiums after December 17, 1999, on a life insurance, annuity, or endowment contract in connection with a transfer for which a charitable deduction was not allowable is subject to a penalty tax equal to the amount of premiums paid.1 The IRS has indicated that other penalties may be imposed on charitable organizations involved in charitable split-dollar plans.2

1. IRC § 170(f)(10)(F).

2. Notice 99-36, 1999-2 CB 1284.

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