Income Taxation of Life Insurance Benefits

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Webster's dictionary defines life insurance as "insurance providing for payment of a stipulated sum to a designated beneficiary upon death of the insured." However, the tax code has its own definition of life insurance. If your life insurance policy qualifies under the tax code's definition, you and the policy's beneficiaries may enjoy many income tax advantages. This discussion focuses on the income tax implications surrounding life insurance benefits. For a discussion in general about the income tax implications of life insurance, see Income Taxation of Life Insurance.

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