The buyout of a partner or shareholder's interest in a business is considered a capital transaction; therefore, premiums paid to fund policies are not tax deductible. Benefits received from the policy are not taxable as income. There may, however, be a tax on the sale of the business interest.

			Taxation
Premium Payor	Policy Owner	Benefits Payable to	Premiums	Benefits
Partnership, Entity Purchase	Partnership	Partnership	Not Deductible; IRC Sec. 265	Tax Free; IRC Sec. 104(a)(3)
Partnership, Cross Purchase	Partner of Insured	Partner of Insured
Corporation, Entity Purchase	Corporation	Corporation
Corporation, Cross Purchase	Individual Shareholder	Individual Shareholder

This concludes our discussion about the kinds of needs you can solve with business disability income insurance. For information about how to market and sell your products and services, go to the separate Appendix for this unit. Also, information concerning buy-sell underwriting conditions are found in the Marketing Guide.