On the Record: Taking Out Life Insurance on Your Donors: A Gamble?

Whether a charity would be deemed to have realized UBIT when it receives proceeds of a life insurance policy under this plan is not entirely clear.

Internal Revenue Code 101 (a)(1) excludes from gross-income any amounts received from life insurance. But the Internal Revenue Service has ruled that a charity that gave an insurance provider a list of its members and publicized the availability of coverage to its members in exchange for a rebate of a portion of the provider’s profits, realized UBIT because the income was part of a “regularly carried on” business relationship.