Supreme Court Upholds IRS Stance on Corporate Life Insurance Taxation

Unanimous ruling clarifies tax implications for closely held corporations using life insurance for share redemption.

The Supreme Court ruled that life insurance proceeds used to redeem shares must be included in the corporation's value for estate tax purposes.
The case involved the Connelly brothers' company, where life insurance funded the redemption of a deceased brother's shares.
The court's decision resolved a conflict among lower courts on this tax issue.
Justice Thomas emphasized that fair-market-value redemption does not reduce the value of the shares.
The ruling suggests alternative succession planning strategies for closely held corporations.