The question is basis. There is a CPA somewhere in the Midwest that claims that there should be no gain on the stock because premiums paid over the years give you basis. I'm not sure that anyone knows exactly how to calculate the basis on the shares acquired when a life insurance company goes from a mutual insurer to a stock company.

The beneficiaries could buy the shares at FMV but I don't see how that's different than just selling them. Registering the shares after a private sale might be difficult.

The trust has a $100 exemption and pays tax at capital gain rates and the proceeds from the stock are enough to more than cover the tax. The policy is still fine after the shares are sold, so I can't see the client's problem.

If you do a google search, you may be able to find the info about the basis on the shares.

Mary Kay Foss