Tax Facts

8772 / Are life insurance policy premiums deductible if paid by a partnership or an individual partner on the life of a copartner?

No. This is true regardless of who is named as policy beneficiary. Premiums paid for any life insurance, or endowment or annuity contract, are not deductible if a taxpayer is directly or indirectly a beneficiary under the policy or contract.1 The premium paying partner will derive a benefit from the policy even if the insurance is purchased as a key person policy or to finance the purchase of an insured’s partnership interest.2

The general rules governing the deductibility of life insurance premiums (see Q 8765) apply in the case of insurance purchased by a partnership on the life of an employee who is not a partner.

1.  IRC § 264(a)(1).

2.  Treas. Reg. § 1.264-1.

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