Tax Facts

293 / Where a life insurance policy is assigned to an employer in restitution of funds embezzled by an insured, are proceeds tax-exempt to the employer?



No.

The employer does not receive the proceeds as life insurance payable by reason of the insured’s death but as a restitution of embezzled funds. Consequently, the income tax exclusion under IRC Section 101(a) does not apply. If the employer has claimed a loss deduction, the employer must report the proceeds as a recovery of a previously deducted embezzlement loss.1






1.     Tennessee Foundry & Mach. Co. v. Commissioner, 399 F.2d 156 (6th Cir. 1968).

Tax Facts Premium Tools
Calculators
100+ calculators specifically designed to help you easily assist clients with specific planning situations and calculations.
Practice Guidance
Designed to help you discover new ways for which to build and maintain client relationships.
Concepts Illustrated
Specifically designed to help you easily assist clients with specific planning situations and calculations.
Tax Facts Archives
Access to the entire library of Tax Facts dating back to 2012 allowing you to look up the exact tax figures from prior years.