XYZ Corporation is a closely held corporation. Martin McFly, along with the three other owners, set up a Buy-Sell agreement setting the terms in the event a shareholder becomes deceased or disabled. The plan is funded by entity life insurance policies on each shareholder. Premiums are paid by the corporation. The agreement states that the share price of any buyout will be established by an independent, competent third-party appraiser). What are the tax implications of this plan? 1. The death benefit proceeds are taxable to the surviving shareholders 2. The surviving shareholders will receive a step-up in basis on their interest in the company equal to the death benefit 3. The corporation will take a tax deduction on the premiums paid none 1 and 2 2 and 3 only 1,2,3,4