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Life Ins policies in VEBA surrendered, cash goes back into the VEBA,


katieinny
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A large VEBA had 100+ whole life insurance policies. The policies have been surrendered. The cash went back into the VEBA and is being used to pay retiree benefits. The cash received was more than the premiums paid, so there was a gain. Is that gain taxable to the VEBA? the person whose life was insured, the retiree getting benefits?

The insurance company issued 1099s in the name of the person whose life was insured. That doesn't make sense to me. If the money went back into the VEBA, I wouldn't think it would be taxable at all. However, VEBAs aren't my forte, so I'm asking for help.

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I had a similar situation come up recently where the carrier 1099'd the insureds as well. In this case, the VEBA trustee went back to the carrier and asked them to report the 1099 to them as owner and beneficiary of the policies. The understanding is that the gain is taxable to the VEBA trust as UBTI.

 - There are two types of people in the world: those who can extrapolate from incomplete data sets...

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