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SKLBI
Returning Member

1099 for COLI

I received a 1099-MISC for a Corporate Owned Life Insurance (COLI) policy for my parent's estate.    It shows the full value in Box 3, Other Income.  The policy was a one-time offering in 1990.  The company paid 100% of the premiums and is the beneficiary of the policy.  I understand that the 1099-MISC is needed because it was provided as a "death benefit".   

However, I have a document from 1990 that says, "The first $5000 of death benefits is tax exempt under current tax law.  This differs from the tax treatment of death benefits payable under the basic life insurance program which are generally tax exempt."

The company representatives I have spoken with have only indicated that it is a death benefit.  One forwarded the above statement to Legal but I am not hopeful to receive an answer in a timely fashion.

Even if the law was changed, would the 1990 policy and the above statement be grandfathered?  If so, do I need to get a corrected 1099-MISC or should I just subtract $5000 when I enter the income?

Any advice is appreciated.

Thank you.

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1 Reply
ThomasM125
Expert Alumni

1099 for COLI

You need to deduct up to $5,000 from your income after reporting the amount listed on the Form 1099-MISC. You can read more about the employee death benefit exclusion here:  Employee death benefits

 

To enter the reduction in income on your tax return, follow theses steps:

 

1. From the Federal menu in TurboTax find Wages and Income 

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the reduction and the adjustment as a negative number

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