Life Insurance Payout Counts in Company Value, 8th Circuit Says

The estate of a corporation founder fighting to exclude his life insurance proceeds from being counted toward the company’s fair market value was unable to dissuade the Eighth Circuit from upholding a $1 million tax bill from the IRS.

Michael and Thomas Connelly owned Crown C Corporation, a St. Louis-based building-materials company, and entered into a stock purchase agreement that would allow either brother to purchase the other brother’s shares in the company upon death of the sibling. If declined, the company itself would redeem the shares.

The company also took out a $3.5 million life insurance policy on both ...