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The amended returns for 1980 through 1982 claimed refunds of tax
attributable to the carryback of investment tax and business
energy credits from the 1983 taxable year. The 1983 amended
return sought a refund of tax based on claims to deductions for
management fees and investment tax and business energy credits in
the amount of $11,500 each. Petitioners also amended their 1979
return on December 4, 1985, to "remove" investment tax and
business energy credits that had originally been carried back
from the 1982 taxable year.
Jack R. Prewitt (petitioner) took courses at Purdue
University's school of estate planning and is knowledgeable in
tax matters. Around 1978, petitioner purchased, for $25,000, an
insurance agency named "U.S. Estate Services, Inc." (Estate) from
his partner, Norbert Roy (Roy). Roy was petitioner's tutor in an
estate planning business, in which life insurance was used to
fund the payment of estate tax. Petitioner focused his business
activity in the area of estate planning for farm owners. He
advertised in magazines oriented to farming, obtained leads, and
then proceeded to sell insurance designed to pay the estate tax
on farms (illiquid assets). His business expanded to the point
where eight or nine planners (salespeople) were involved in the
business. Eventually, petitioner's business became the number
one such life insurance agency operating under a large insurance
underwriter.
Because the premium on the amount of insurance needed to
fund the estate tax liability for a farm was beyond the means of
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