Murphy Archives

Lapsed Life Insurance Policy Generated Taxable Income and Limited Interest Deductions

Apr 29, 2026

A recent United States Tax Court memorandum[1] opinion provides an important reminder that life insurance policies with outstanding loans can create unexpected income tax consequences when the policy lapses or is surrendered.[2] In Sawyer v. Commissioner, the Tax Court held that a taxpayer realized taxable income when the cash surrender value of his life insurance…
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Murphy Case – Reasonable Reliance for Failure to File

Cases, District Court, Estate Administration, Estate Planning, Income Tax, Tax

Jul 14, 2025

In a recent case issued from the United States District Court for the Eastern District of California, the Court held that a Trustee’s reliance on the advice of a CPA that no trust income tax return was due was enough to establish reasonable cause for such failure and thus avoid late payment and filing penalties.[1]…
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Lapsed Life Insurance Policy Generated Taxable Income and Limited Interest Deductions

Murphy Case – Reasonable Reliance for Failure to File

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Lapsed Life Insurance Policy Generated Taxable Income and Limited Interest Deductions

Improperly Prepared Estate Tax Return Costs Estate a Shot at the Marital Deduction

Beneficiaries and Trustees May Face Personal Liability for Unpaid Estate Taxes