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A life settlement turns insurance assets into cash, giving the original policyholder an amount greater than the cash surrender value in exchange for ownership of the policy. Thirteen other states require that if the insured is not the policyowner, a dependent must be the owner of the policy for the cash surrender value to be exempt. In the rulings, the IRS held that the employee was taxable on the cash surrender value less the employee's contributions, in the year the employer transferred the policy to the employee. |
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