Life Insurance Donation Scam?

By | August 25, 2009

I have read this article about five times and still have a hard time figuring out what was going on here.  Some sort of Life Insurance gifting donation program and it looks like the poor folks might have got taken, you decide…

UNI ends insurance-for-donation program — chicagotribune.com

CEDAR FALLS, Iowa – The University of Northern Iowa has ended a program that allowed athletic scholarship donors to get life insurance equal to their donation.

The Des Moines Sunday Register reported that nearly 1,700 contributors lost an estimated $6.8 million in benefits.

Donors to the Panther Scholarship Club received a matching amount credited as an insurance death benefit under a contract with Fidelity Security Life Insurance. One donor, Stanley Atkinson, accumulated more than $14,000 in benefits.

The program, which ran from 1982 until December 2008, was ended after it was discovered it violated federal tax laws. The donors and the university could end up owing the federal government back taxes.

It’s unknown how much each individual donor may have to pay, but documents show the university could be responsible for up to $170,000 in back taxes.

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