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Is a “Trust” Really a Trust for Tax Purposes?


Interior Glass Systems, Inc. v. United States discusses what a trust is for tax purposes in the context of tax shelters. It reconsiders an earlier decision under a Rule 59(e) motion.

Life Insurance Premium Deductions

The Internal Revenue Service initiated a $40,000 penalty on Interior Glass for failure to disclose two life insurance premium deduction participations: the Insured Security Program (ISP) and the Group Term Life Insurance Plan (GTLP).

The Association for Small, Closely-Held Business Enterprises (ASCHBE) provided both programs. The theory was that an employer could claim life insurance premiums as deductions by paying the premiums on behalf of employees. The employees would have no income given this fringe benefit treatment.

Interior Glass’s participation in the ISP began in 2006 and ended in 2008, while participation in the GTLP began in 2009 and continued through 2011. Under both plans, Interior Glass took annual deductions for life insurance premium payments while its employee-owner, the beneficiary, recognized nothing for income.

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Julian Schubach is an Investment Advisor Representative of Nosuris, Inc., a New York State Registered Investment Advisory. Investment Advisory Services are offered through Nosuris, Inc., a NYS Registered Investment Advisory. Please visit www.Nosuris.com for additional disclosures. Check the background of this firm on FINRA’s BrokerCheck.

©2016 by Julian Schubach