By
Kathleen Stephenson
and Lisa Petkun
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What is not clear in this new plan is whether a charity would be deemed to be engaged in a “trade or business,” whether that trade or business is deemed to be regularly carried on, or whether the IRC exclusion for life insurance trumps the UBIT rules.
The debt-financed income rules under IRC 514 also must be considered. If an organization borrows funds to acquire an insurance policy, there could be “acquisition indebtedness,” which would cause the receipt of some or all of the insurance proceeds to be subject to tax.
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Kathleen Stephenson
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Lisa Petkun
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