The following is a scenario describing an example of an IRA/Pension Rescue plan.

1.  An Individual takes full distribution of his/her IRA (Possible 10% penalty). This of  course creates a taxable event on 1040.
 

2.  Capital is contributed to the “S-Corp”. This qualifies as a non-taxable event under IRC 351 “Capital Contribution.”
 

3. The WBT Plan is adopted by the “S-Corp” (must be a valid business) and the contribution is made to the Trustee of the IRC 162 which is the basis for the deduction “Ordinary and Necessary.”
 

4.  The individual now has an “S-Corp” business expense deduction to pass through.

5.  WBT Trustee purchases Life Insurance on lives of the “employees” with a valid business purpose. In the event of death, the insurance proceeds are paid out to the trustee, who in turn distributes the funds to the ILIT. The Death Benefit maintains its INCOME TAX FREE status under IRC 101.