We received a payment in 2016 from a life insurance company (like AFLAC) for a cancer diagnosis and received a 1099-MISC for the amount. Why is this taxable?

[MinhT · Accepted solution]

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