event of disability of a key person

The Savvy Soup Company purchased a disability insurance policy to provide disability income benefits to the business in the event of disability of a key person. With this type of policy -

 Premiums are not tax-deductible as a business expense

 The disability income benefits are taxable

 Premiums are tax-deductible

 The key person has tax liability for benefits

Correct

Premiums are not tax-deductible as a business expense, but the benefits received by the business are tax-free.