Employer provided Group Term Life ins taxed under section 79 now retired

[maglib]

Spouse into retirement:  Thrown into his paperwork was value of group term life insurance that he had only a limited number of days to respond to but, didn't know he had so it lapsed.  He paid taxes to Fed and NJ as amounts were greater than allowance on the excess life insurance policy as income annually for the past 30 years.  Now it's worthless. He tried to argue to no length as he was not made aware timely... no go. So $ lossed but, did pay taxes.

Now doing taxes.  Is there a loss able to be taken since he paid taxes all these years on the investment?

Thanks.

[MonikaK1]

No, a policy owner cannot claim an investment loss (on his/her tax return) if the cost basis is higher than the proceeds received from a full surrender or policy lapse. The tax law does not treat life insurance as an investment asset. In some cases, they might have ordinary income upon a lapse, such as when there is an outstanding loan that is larger than the basis in the policy.

IRC section 79 provides an exclusion for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. There are no tax consequences if the total amount of such policies does not exceed $50,000. The imputed cost of coverage in excess of $50,000 must be included in income, using the IRS Premium Table, and is subject to social security and Medicare taxes.

[maglib]

In my case, it just expired worthless as they didn't give us notice on time.  But, sadly i think you are right as although it was in excess of 50k and he paid taxes every year on the amount, it was worthless since they were horrendous on their notices.  Just add that to why I don't buy life insurance and self insure.  

Thanks