Court Rules That Section 419A(f)(6) Plan Sponsor Made Taxable Distribution of Life Insurance Policies | Executive Capital Resources

Court Rules That Section 419A(f)(6) Plan Sponsor Made Taxable Distribution of Life Insurance Policies | Executive Capital Resources: TOPIC: Court Rules That Section 419A(f)(6) Plan Sponsor Made Taxable Distribution of Life Insurance Policies

CITES: Gluckman v. Comm'r, No. 13-761, 2013 WL 6124391 (2nd Cir. Nov. 22, 2013); Gluckman v. Comm'r, T.C.M. 2012-329, 2012 WL 5951351 (T.C. Nov. 28, 2012); I.R.C. § 419A(f)(6) (2012); I.R.C. § 6662(b)(2) (2012); Schwab v. Comm'r, 111 AFTR-2d 2013-667 (9th Cir. 2013).

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SUMMARY: The Second Circuit upheld a Tax Court decision that the insured taxpayers, a husband and wife, received a taxable distribution of life insurance policies from a Section 419A multi-employer welfare benefit plan.  The court found in favor of the IRS even though the policies were transferred directly to a second welfare benefit plan and not to the taxpayers. Because the taxpayers were the majority shareholders, the only directors and one served as President of the plan sponsor, the court found that, once the plan was terminated and withdrawal authorized by plan administrator, the taxpayers exercised actual control over the policies with no "substantial risk of forfeiture."

FACTS: The Gluckmans ("taxpayers") were majority shared