Form 1099-LS: Reportable Life Insurance Sale
Report life insurance contract sales
Department of the Treasury — Internal Revenue Service
Payer's Name: [Payer Name] TIN: [Payer TIN]
Payer's Address: [Payer Address] Phone: [Payer Phone]
Recipient's Name: [Recipient Name] TIN: [Recipient TIN]
Recipient's Address: [Recipient Address] Account Number: [Account Number]
Tax Year: [Tax Year]
Amount Paid to Seller: [Amount Paid to Seller]
Date of Sale: [Date of Sale]
Issuer Name: [Issuer Name]
Party 1
________________
Signature
Date: ________________
Party 2
________________
Signature
Date: ________________
What Is a Form 1099-LS: Reportable Life Insurance Sale?
A Form 1099-LS: Reportable Life Insurance Sale in the United States governs the sale and transfer of property between buyer and seller and the obligations of each.
Prior to the TCJA, life insurance policy sales (also known as life settlements or viatical settlements) existed in a reporting gap. The TCJA fundamentally changed the tax treatment of these transactions through new IRC Section 101(a)(3), which provides that the transfer-for-value rules apply to reportable policy sales, and IRC Section 1016(a)(1)(B), which clarifies how the seller's basis in the policy is calculated for determining gain. The seller's investment in the contract now excludes the cost of insurance (the portion of premiums attributable to mortality charges), meaning the seller's basis is lower and the taxable gain is correspondingly higher than under prior law.
Form 1099-LS must be filed by the acquirer (the person who acquires an interest in the life insurance contract, whether directly or indirectly) for each reportable policy sale. A reportable policy sale is defined under IRC Section 101(a)(3)(C) as the acquisition of an interest in a life insurance contract, directly or indirectly, if the acquirer has no substantial family, business, or financial relationship with the insured apart from the acquirer's interest in the policy. This definition specifically targets third-party purchases by life settlement companies, viatical settlement providers, institutional investors, and secondary market purchasers.
When Do You Need a Form 1099-LS: Reportable Life Insurance Sale?
Form 1099-LS is filed whenever a reportable policy sale of a life insurance contract occurs. The most common scenario involves a life settlement transaction, where a policy owner (typically a senior citizen who no longer needs or can afford the coverage) sells their life insurance policy to a life settlement company for a lump sum payment that exceeds the policy's cash surrender value but is less than the death benefit. The life settlement company then continues paying premiums and collects the death benefit when the insured passes away.
Viatical settlements, where a terminally or chronically ill individual sells their policy, also trigger Form 1099-LS, although the tax treatment differs. Under IRC Section 101(g), amounts received by a terminally ill individual from a viatical settlement provider are excludable from income as accelerated death benefits, meaning the viatical settlement may be tax-free to the seller. However, the acquirer must still file Form 1099-LS to report the transaction. Sales to investors who are not licensed viatical settlement providers do not qualify for the exclusion.
Other triggering events include the sale of a policy through a life settlement broker or auction platform, transfers of beneficial interests in policy-owning trusts, sales of key-person insurance policies by businesses, and secondary market transactions where a life settlement company resells a previously acquired policy to another investor. The form is due to the IRS by February 28 (March 31 if filing electronically) and to the seller by January 31 of the year following the sale. Upon receiving Form 1099-LS, the seller must report the gain on their tax return, calculated as the amount received minus their adjusted basis (premiums paid minus cost of insurance charges).
What to Include in Your Form 1099-LS: Reportable Life Insurance Sale
Form 1099-LS contains specific data fields required for the seller to compute gain on the reportable policy sale. Box 1 reports the date of the sale, establishing the tax year in which the seller must recognize gain or loss. Box 2 reports the total amount of the payment — the consideration paid by the acquirer to the seller for the life insurance contract. This includes cash, the fair market value of any other property transferred, and assumption of policy loans.
The form identifies both the acquirer (filer) and the seller (recipient), with their names, addresses, and TINs. The seller uses the payment amount from Box 2 to calculate their gain by subtracting their adjusted basis in the contract. Under the TCJA rules codified in IRC Section 1016(a)(1)(B), the seller's basis equals the total premiums and other amounts paid for the contract, reduced by the cost of insurance (mortality charges and certain other charges that were not allocable to any other purpose). This "cost of insurance" reduction was a significant TCJA change that reduced sellers' basis and increased taxable gains.
The acquirer must also send a copy of Form 1099-LS to the insurance company that issued the contract, using Form 1099-SB (Seller's Investment in Life Insurance Contract). The insurance company then uses Form 1099-SB information to report the seller's investment in the contract back to the seller, providing the seller with the cost of insurance figure needed to calculate adjusted basis. This three-party reporting chain (acquirer to IRS via 1099-LS, acquirer to insurer via notification, insurer to seller via 1099-SB) ensures that all parties have the information necessary for accurate tax reporting. The seller reports the gain on Schedule D and Form 8949, with the character of the gain (ordinary income versus capital gain) depending on the seller's relationship to the policy and the purpose for which it was held.
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Forms Legal. (2026). Form 1099-LS: Reportable Life Insurance Sale (United States) [Legal document template]. Forms Legal. https://forms-legal.com/usa/government/tax-forms/form-1099-ls
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author = {{Forms Legal}},
title = {Form 1099-LS: Reportable Life Insurance Sale (United States)},
year = {2026},
howpublished = {\url{https://forms-legal.com/usa/government/tax-forms/form-1099-ls}},
note = {Free legal document template. Based on Internal Revenue Code (26 U.S.C.)}
}Frequently Asked Questions
Form 1099-LS, Reportable Life Insurance Sale, is an IRS information return that reports the acquirer's payment in a reportable life insurance sale, such as a life settlement, in which a policy is sold to a third party. The payer or filer sends one copy to the IRS and furnishes another copy to the recipient, who uses the information to report the relevant amounts on their federal tax return. Because the IRS receives its own copy and matches it against the recipient's return, the amounts on the form should be reflected accurately on the recipient's taxes. The form identifies the payer, the recipient, their taxpayer identification numbers, and the reported amounts in numbered boxes. the acquirer (buyer) in a reportable policy sale issues Form 1099-LS to the seller of the life insurance policy. Because the reporting rules and boxes are specific to this form, the filer should confirm which amounts are reportable and the recipient should reconcile the form with their own records before filing their return.
Form 1099-LS is issued by the entity responsible for the reportable transaction, and the acquirer (buyer) in a reportable policy sale issues Form 1099-LS to the seller of the life insurance policy. The acquirer must furnish the recipient copy and file with the IRS by the applicable deadlines for these information returns. Payers that file 10 or more information returns in total must file electronically under current IRS rules. Penalties apply for filing late, failing to file, or providing incorrect information, and they increase the longer the form is overdue. Because the deadlines are firm and the electronic filing threshold is low, filers should gather the recipient's correct taxpayer identification number, often using Form W-9, well before the due date. Recipients who do not receive an expected form by the deadline should contact the payer, but they remain responsible for reporting the income or transaction on their return regardless of whether the form arrives on time.
When you receive Form 1099-LS, you should review it for accuracy and use it to report the relevant amounts on your federal tax return, because the IRS receives a matching copy. Form 1099-LS reports the amount you received for selling a life insurance policy, which you use to determine any taxable gain on the sale, generally reported on your income tax return after subtracting your basis in the policy. Verify that your name, taxpayer identification number, and the reported amounts are correct, and contact the issuer for a corrected form if you find an error, since a mismatch can trigger an IRS notice. Keep the form with your tax records even after you file. Even if the amount seems small or you believe it is not taxable, you should not ignore the form, because the IRS will expect to see it reflected on your return. Because unreported 1099 income can lead to additional tax, interest, and penalties, you should reconcile the form with your records and address any discrepancy with the issuer before filing.
A reportable life insurance sale on Form 1099-LS is the sale of an existing life insurance policy or interest in a policy to a third party who has no substantial family, business, or financial relationship with the insured, commonly known as a life settlement. The buyer, called the acquirer, must report the payment made to the seller, which is why the seller receives Form 1099-LS. Reporting rules were added by the 2017 tax law to track these transactions, and related Form 1099-SB reports the seller's basis. When you sell your policy, the proceeds may produce taxable income: generally, the portion of the sale price up to your basis is a return of basis, the portion representing what would have been ordinary income may be taxed as ordinary income, and the remainder may be capital gain. Because the tax treatment of a life settlement is layered and depends on your basis and the policy's cash value, you should determine your basis and consult the related rules before reporting the sale.
Official Form 1099-LS is available from the IRS, and the copy filed with the IRS generally requires the official scannable format, so a downloaded PDF cannot simply be printed and mailed as the IRS copy. Filers can order official paper forms from the IRS, use accounting or specialized software, or file electronically through the IRS Information Returns Intake System (IRIS) or the FIRE system. Because filers submitting 10 or more total information returns must file electronically, most use software or an electronic filing service. The recipient copy may be furnished on paper or, with the recipient's consent, electronically. The forms-legal.com template helps users organize the information that goes on the form, but the official return must be submitted to the IRS through an approved channel. Because the IRS requires its scannable format for paper filing, filers should use official forms or electronic filing rather than the informational PDF.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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