Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service.
Dear Tax Talk,
I sold a piece of property on the installment sale method and the buyer has been making payments for years. In the sales agreement, the buyer was required to have insurance that would pay off the loan if she died. She died recently, and I am the beneficiary of a life insurance policy that almost pays off the debt. Will the life insurance be taxable as if I received a payment on the loan?
–Carolyn
Dear Carolyn,
Every once in a while I get a question out of the ordinary that makes me pull all the books off the shelves. Well, we don’t actually use books anymore, but certainly we do a lot of Web surfing.
You probably ask the question because you know that the general rule is that life insurance is tax-free to the recipient. An exception to this rule is a transfer of a life insurance contract for valuable consideration. Because the policy was issued in your name as beneficiary for the transfer of the land, this rule would come into play.
When you report the sale of property under the installment sales rules, a portion of every payment is applied to your original cost in the sold asset, and part to gain on the property. This is done based on your gross profit percentage. The collection of the life insurance proceeds would be considered just as any other collection on the loan you had against the property. Assuming you receive the remaining balance of the loan that was not paid off through insurance, your gross profit is the same and your gain is the same as if you had just been paid otherwise.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.
Share