Tax Law Updates | New Statutes, Regulations, and Rulings
January 19, 2010
IRS Issues Guidance Relating to Interest Disallowed As a Deduction under Section 264(a)(4) But May Be Allowed in Determining Earnings and Profits
Revenue Ruling 2009-25
Rev. Rul. 2009-25, 26 CFR 1.312-6, 9/4/2009
Revenue Ruling 2009-25 holds that disallowed interest under § 264(a)(4) reduces earnings and profits (“E&P”) for the taxable year in which the interest would have been allowable as a deduction, but for its disallowance under § 264(a)(4). It does not further reduce E&P when the death benefit is received under a life insurance contract, according to the Internal revenue Service (“IRS”).
In making this holding, the IRS gave the following example: A, an individual, holds a paid-up life insurance contract on his own life. Upon the death of A, the death benefit under the contract ($500) is payable to the beneficiary…
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