Tax Assessment

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7th Circuit Court of Appeals

Case Name: Vee’s Marketing Inc. v. United States of America

Case No.: 15-2441

Officials: POSNER and WILLIAMS, Circuit Judges, and PALLMEYER, District Judge

Focus: Tax Assessment

Appellant fails to file proper report associated with tax deductions and is properly assessed penalties.

“When later Vee strategically terminated his participation in the plan, the plan used $147,000 from the reserve account to buy a paid-up life insurance policy for Vee with a face value of $400,000. That was the amount payable upon Vee’s death to his beneficiaries, but it wasn’t all that the reserve account could be used for. CJA told its customers that the paid-up policy could be sold, and it even helped find buyers. As explained in Ohio National Life Assurance Corp. v. Davis, 803 F.3d 904, 908 (7th Cir. 2015), it is lawful in many states (including Vee’s state, Wisconsin, although generally not until five years after the issuance of the policy, see Wis. Stat. § 632.69(12)) to purchase the beneficial interest in an existing policy on the life of the insured. Vee thus could if he wanted sell the beneficial interest in his post-retirement life insurance policy. He would be taxed on his income from the sale but he would not have been taxed on the income that had gone into his accumulation reserve and thus financed his acquisition of the life insurance policy that he then sold.”

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.