Taxable Life Insurance Dividends


W

William Brenner

A letter from a major life insurance company begins with (their words)
"Good news", and goes on to explain that a very old whole life policy
has reached the point where the total dividends received have equaled
all of the premiums paid.

The "good news" continues with the explanation that the above means that
$600+ of this year's $1100+ dividend will be taxable income. (The tax
can be deferred by purchasing additional paid up insurance, which I
choose to not do.)

The question is: Is this Line 21 Other Income? If not, where is it
entered on Form 1040?

Thank you.

Bill
 
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W

William Brenner

William said:
A letter from a major life insurance company begins with (their words)
"Good news", and goes on to explain that a very old whole life policy
has reached the point where the total dividends received have equaled
all of the premiums paid.

The "good news" continues with the explanation that the above means that
$600+ of this year's $1100+ dividend will be taxable income. (The tax
can be deferred by purchasing additional paid up insurance, which I
choose to not do.)

The question is: Is this Line 21 Other Income? If not, where is it
entered on Form 1040?

Thank you.

Bill
It just occurred to my tired brain that, as it is a DIVIDEND, Schedule B
might be a another possibility. I suppose it would be too much to
expect that it would be a "qualified" dividend.

What say thee?
 
H

Han

It just occurred to my tired brain that, as it is a DIVIDEND, Schedule
B might be a another possibility. I suppose it would be too much to
expect that it would be a "qualified" dividend.

What say thee?
Wait or ask for a 1099?
 
B

Bill

(e-mail address removed) (William Brenner)
William said:
OP elided, for brevity
It just occurred to my tired brain that, as it is a
DIVIDEND, Schedule B might be a another
possibility. I suppose it would be too much to
expect that it would be a "qualified" dividend.
What say thee?
I was just about to respond with that very same opinion, except I wasn't
sure of the "qualified" issue -- and would suggest you either contact
the company, or perhaps await the formal 1099-DIV, which will
undoubtedly be coming.

Bill
 
E

Elle

William Brenner said:
a very old whole life policy has reached the point where
the total dividends received have equaled all of the
premiums paid. snip
The question is: Is this Line 21 Other Income? If not,
where is it entered on Form 1040?
Pub. 17 (2007), page 64 and the 1040 instructions for Line
21 say Line 21.
 
B

Bill Brown

A letter from a major life insurance company begins with (their words)
"Good news", and goes on to explain that a very old whole life policy
has reached the point where the total dividends received have equaled
all of the premiums paid.

The "good news" continues with the explanation that the above means that
$600+ of this year's $1100+ dividend will be taxable income. (The tax
can be deferred by purchasing additional paid up insurance, which I
choose to not do.)

The question is: Is this Line 21 Other Income?  If not, where is it
entered on Form 1040?
Line 21. Despite what the insurance company calls the payment it is
not a dividend for federal tax purposes.
 
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S

Stuart Bronstein

Bill Brown said:
Line 21. Despite what the insurance company calls the payment it
is not a dividend for federal tax purposes.
Why isn't it considered a refund?

Stu
 
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S

Seth

Why isn't it considered a refund?
Because it's in excess of the total paid.

If you buy something from a store for $20, with a $10 discount (so you
pay $10) and a $15 mail-in rebate, you have to report the $5 net you
receive as taxable income.

Seth
 

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