Caught off guard

Seismic changes in the way the US tax authorities intend to tax the returns on American senior-citizen-based life settlement funds have caught many fund managers on the hop

On May 1, the US Internal Revenue Service (IRS) issued two rulings clarifying its position on the purchase and sale of life settlements. IRS Ruling 2009-13 discusses the tax implications for US insured’s disposing of their policies, either by surrendering them back to the issuing life office or selling them into the second-hand market. IRS Ruling 2009-14, on the other hand, raises the issue of tax implications for purchasers of life settlement policies, who receive a benefit when the insured dies. Clearly, there are significant implications for investors in this asset class. Bac...