The U.S. Supreme Court affirmed a decision on Thursday denying a tax refund to the estate of a building materials company owner, who used a $3.5 million life insurance payout to purchase his shares in the business.
Taxing on Estate Insurance Payout :Court Decision and Impact
In a unanimous opinion, the court upheld the Eighth Circuit’s ruling from last year. The court found that the life insurance proceeds used for stock redemption by Crown C Supply, following the death of co-owner Michael Connelly, were an asset that increased Crown’s value. This, in turn, inflated the value of Connelly’s stock and increased the estate’s tax liability.
The court rejected the estate’s argument that the proceeds should be considered a liability for Crown C Supply, which would reduce its value for calculating estate tax, similar to any debt.
Taxing on Estate Insurance Payout : Key Arguments and Rulings
Thomas Connelly, the executor of the estate and Michael Connelly’s brother, argued that the proceeds were a stock redemption. Justice Clarence Thomas stated that this view “cannot be reconciled with an elementary understanding of stock redemption.”
