Insurance Expense for Partnership

[Terry D EA]

I am in the process of completing a return for a rental property partnership that is an LLC and uses form 1065 each year. The partners decided to purchase life insurance through the LLC that covers each of the partner's liability for the mortgages on several of the rental properties should either one of them die. Would this be a deductible expense to the partnership? I question this as it is designed to protect their personal interests and not the interests of the partnership. They each have guaranteed mortgages for properties and will continue to do so until the partnership can stand credit worthy on it's own.

[Terry D EA]

I am moving this question up the ladder some as I didn't get any replies. I am pretty sure this is an allowed expense but wanted other's opinions.

[Lynn EA USTCP in Louisiana]

Unresearched - allocate to guaranteed payments to partners

[Abby Normal]

Life insurance is rarely deductible. I'd show as draws or guaranteed payments.

[Lee B]

Information a little sketchy, but assuming the normal scenario:

 

Premiums deductible on the books, but nondeductible on the tax return.

 

Thus the nondeductible premium expense is allocated to the partners K - 1 s

 

When and if a policy pays off, Proceeds recorded on the books but nontaxable on the tax return.

[Gail in Virginia]

My first question was "who is the beneficiary of the life insurance?"  I am wondering if this is similar to "key man" insurance.  However, I did not answer because I don't know and this is just not a good time for extra research.  I would say that cbslee is probably right.

[Terry D EA]

I don't have those answers either but I will try to find out. Thanks cbslee you have shed some light on this for me.