Tax Facts

4025 / When is a split dollar plan that was entered into or materially modified after September 17, 2003 treated as a loan and what are the tax consequences?

A split dollar arrangement will be treated as a loan if:

(1) payment is made by the non-owner to the owner;

(2) payment is a loan under general principles of federal tax law or a reasonable person would expect the payment to be repaid to the non-owner; and

(3) repayment is made from, or secured by, either the policy’s death benefit, cash value, or both.1

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