Tower Loan of Mississippi, Inc. - Page 3

                                        - 3 -                                         
          customers.  Prior to its organization of AFLIC and AFIC in 1983,            
          petitioner had received and retained a portion of the premium               
          payments from the sale of the credit life insurance.  However,              
          petitioner was sued by several customers who claimed that because           
          petitioner received insurance commissions, effectively, the loans           
          were usurious and unenforceable.  Other finance companies were              
          being sued on this theory as well.  The primary purpose for the             
          formation of the insurance companies was to avoid the legal                 
          problems associated with petitioner’s charging and receiving                
          premiums from the sale of credit life insurance.  AFIC is in the            
          business of providing property and casualty insurance.  AFIC                
          files consolidated returns with petitioner.                                 
               AFLIC is primarily in the business of providing credit life            
          and disability insurance.  AFLIC files its returns separately               
          from petitioner.2  AFIC and AFLIC continued to exist as wholly              
          owned subsidiaries of petitioner during the years in issue.                 
          Petitioner gives its customers the option of purchasing credit              
          insurance for their loans.3  Credit insurance policies offer                
          protection to the creditor and debtor by providing for payment of           
          the loan in the event of certain occurrences such as death or               

               2 Pursuant to sec. 1504(b)(2), AFLIC is not an includable              
          corporation and therefore is not eligible to file in the                    
          consolidated returns.                                                       
               3 Petitioner also offers property insurance.  We will not              
          discuss property insurance policies, as they are not relevant to            
          the issues in this case.                                                    

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  Next

Last modified: May 25, 2011