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William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Agent Resources’

Insurance Agents Sued for Giving Bad Tax Advice

Posted by William Byrnes on January 7, 2011


Can life insurance agents and their carriers be held responsible for adverse tax consequences resulting from their advice to customers about transactions involving the policies agents recommend and sell?  A customer who relied on agents for tax advice concerning an annuity transaction believed the agents should be held to account for recommending a transaction that turned out to carry an unexpected tax bill.   She sued the Insurance Company in federal district court, claiming its agents committed fraud against her by failing to inform her of the tax consequences of an annuity rollover.

The plaintiff owned two annuities—valued at about $80,000 and $12,000—that she received in a divorce settlement.  She contacted the insurance company to find out her options for rolling the annuities over into one policy. Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

We invite your questions and comments by posting them or by calling the Panel of Experts.

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Insurance Agents Sued for Giving Bad Tax Advice

Posted by William Byrnes on December 16, 2010


Can life insurance agents and their carriers be held responsible for adverse tax consequences resulting from their advice to customers about transactions involving the policies agents recommend and sell?  A customer who relied on agents for tax advice concerning an annuity transaction believed the agents should be held to account for recommending a transaction that turned out to carry an unexpected tax bill.   She sued the Insurance Company in federal district court, claiming its agents committed fraud against her by failing to inform her of the tax consequences of an annuity rollover.

The plaintiff owned two annuities—valued at about $80,000 and $12,000—that she received in a divorce settlement.  She contacted the insurance company to find out her options for rolling the annuities over into one policy. Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

We invite your questions and comments by posting them or by calling the Panel of Experts.

Posted in Insurance | Tagged: , , , , , , , | Leave a Comment »

Foreign Insurance Company Taxation – Less Complicated than It Sounds

Posted by William Byrnes on October 11, 2010


Why is this Topic Important to Wealth Managers? Provides insight into relevant taxation issues regarding the ownership of a foreign insurance company, premium payments made to a foreign insurance company, and foreign insurance company income taxation. Discusses information wealth managers may find relevant in regards to advanced family and business estate plans.

What are the U.S. tax implications, generally, for a United States Corporation that owns a foreign insurance company?

To begin, a well known rule is that premiums paid to a foreign insurance company are subject to a federal income premium tax. The tax is due even though the U.S. parent may own the foreign insurance company, either in part or in full.  The tax is remitted by the premium payor who “must file Form 720 to pay the tax at the time of the premium payment.”[1]

For casualty insurance policies the tax is 4% of the total premium payment to a foreign insurer and for life insurance and annuity contracts the tax is 1% of the premium paid.[2] The tax only applies to premium payments to a foreign insurer.

If a foreign company carrying on an insurance business within the United States qualifies as a life or casualty insurer under the Code, “if it were [otherwise] a domestic corporation,” then the company is “taxable under such part on its income effectively connected with its conduct of any trade or business within the United States.” [3]

To determine what income then is effectively connected with a trade or business within the United States, one must know what a trade or business within the United States means.  “Neither the Code nor the regulations fully define the term ‘trade or business within the United States.’ ” [4] Most “cases hold that profit oriented activities in the United States, whether carried on by the taxpayer directly or through agents, are a trade or business if they are regular, substantial, and continuous.” [5] Additionally, an insurance company “makes contracts over a period of years”, which leads one to believe the issuance of insurance contracts on persons or activities in the United States is continuous. [6]

Read on about Foreign Insurance Company Taxation

Posted in Insurance, Tax Policy, Taxation | Tagged: , , , , , , , | Leave a Comment »

 
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