Accelerated death benefits paid for a cancer diagnosis are generally not taxable. They are treated by the IRS in the same way as death benefits. You do not need to report this form 1099-MISC on your tax return.
There is an exception to this rule when the policy has been transferred for value to a third party.
Please read this document for more information:
http://www.lifeventurescorp.com/Uploads/66536.pdf
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