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Long Overdue Life Settlement IRS Ruling Dogged By Ambiguity
SL advises all Life Settlement investors to check the
SL - a global leader in traded endowment and life settlement
based investments - is advising all of its clients to regard IRS
ruling 2009-14 as applying to all types of Life Settlements, and
cautions against assuming the ruling applies only to 'term'
The US Internal Revenue Service has issued a long awaited ruling
on the treatment of 'Withholding Tax' (WHT) on 'stranger owned'
life insurance policies - IRS ruling 2009-14. This now confirms
that WHT will apply to the profits on policies that mature. Profits
are defined as the death benefit less purchase cost less premiums
paid and the potential tax charge is 30%. The exact treatment and
classification of the tax depends on whether the policy is held to
maturity, or sold by the secondary holder.
Ambiguity still exists because Ruling 2009-14 refers only to
policies with no cash value, whereas many Life Settlements policies
held by investors do in fact have a cash value at some time prior
to maturity. This 'will it or won't it' question has dogged the
Life Settlement industry for years.
Patrick McAdams, Investment Director at SL, commented:
"This is the ruling the industry has been anticipating for a
number of years but unfortunately it lacks clarity. Our investment
approach is based on a robust and cautious approach designed to
deliver maximum value to investors in Life Settlements. Therefore
we believe it appropriate to assume that the ruling will apply to
all types of Life Settlements policies".
Patrick added: "Our flagship Life settlement fund, "Life Plus"
is purpose built to ensure that eligible investors will not be
liable to WHT, irrespective of the lack of clarity in ruling
2009-14. Life Plus is a Luxemburg based FCP managed by our
own Luxemburg fund management subsidiary, and takes advantage of
double tax treaties and the unique structure of the fund to ensure
that eligible investors will not have WHT deducted. Life Plus
is currently delivering double digit returns as a result of
maturities not being subject to WHT either now or on a