8773 / Are life insurance premiums paid by a partner for insurance on the partner’s own life deductible by the partner if the proceeds are payable to a partnership or to a copartner?

No, because of the general rule that premiums paid on any life insurance policy, or endowment or annuity contract, are not deductible if a taxpayer is directly or indirectly a beneficiary under the policy or contract.¹ When a policy is purchased as key person insurance or to finance the purchase of an insured’s partnership interest, the insured’s estate and, therefore, the insured, will benefit from the policy.Even if a partner takes out insurance on the partner’s own life and irrevocably designates a copartner as beneficiary to induce the copartner to leave the copartner’s investment in the firm, the insured partner is indirectly a beneficiary under the policy, and so the premiums cannot be deducted.²

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1.IRC § 264(a)(1).

2.Treas. Reg. § 1.264-1.