BIR Ruling No. 032-63

April 2, 1963 BIR RULING NO. 032-63 Messrs. Lim, Macias & Bancod Philamlife Building Isaac Peral, Manila Gentlemen : Reference is made to your letter dated February 14, 1963 requesting opinion on the following questions based on a hypothetical case: cdta A, family corporation, insures the life of B, Chairman of its Board of Directors, paying the premiums thereon, and designating the wife and children of B as revocable beneficiaries. Questions: (1) Are the insurance premiums paid by A corporation deductible from its gross income? (2) Are the insurance premiums paid taxable as income of B? In reply thereto, I have the honor to inform you as follows: 1. The insurance premiums paid by A corporation are not deductible from its gross income. Where a corporation insures the life of its president, the stockholders being beneficiaries in proportion to their holdings and the wife of the president (not herself a stockholder) being a beneficiary in proportion to her husband's stockholders, no deduction for the payment of premiums can be allowed since the corporation itself is indirectly a beneficiary under the policy . (C.D. 659, CB Dec. 1920), p. 192. To the same effect, Casper Ranger Construction Co., BTA 942.) This ruling applies to your hypothetical case considering that the named beneficiaries of the insured are also stockholders of the family corporation. cdti 2. The insurance premiums paid by A corporation are taxable income of B because "premium payments by the corporation are not gifts to the taxpayer but constituted income in the years paid as compensation for services rendered." (Canaday vs. Guitteau, 86 F(2d) 303, CCA 6th, 1936). Where a corporation paid insurance premiums on the policies of insurance taken out by its officers, and merely charged such payments to expense, the payments were taxable income to the officers. (Karl Everest Jameson, BTA Memo Op. Dkt. 106788, 1942.) cdt Very truly yours, (SGD.) JOSE B. LINGAD Acting Commissioner of Internal Revenue