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On its amended 1988 and 1989 U.S. Life Insurance Company
Income Tax Returns, Forms 1120L, AFLIC respectively reported
$3,000,498 and $2,958,091 in gross premiums and respectively took
deductions for commissions paid in the amounts of $1,366,543 and
$1,360,371.4
Respondent sent petitioner a notice of deficiency dated
October 28, 1992, which included increases to petitioner’s gross
income in the amounts of $1,083,197 and $1,140,414, for the years
1988 and 1989, respectively, to clearly reflect commission income
from the sale of credit insurance during 1988 and 1989.
On or about September 23, 1985, Matheney Ford, Inc.
(Matheney Ford), executed a loan agreement and promissory note
(the loan agreement) whereby AFLIC and AFIC agreed to and did
lend Matheney Ford $225,000. The president of Matheney Ford was
George O. Cooper, Jr. (Cooper). AFIC and AFLIC were granted a
security interest in Matheney Ford’s used cars and certain
accounts. Cooper executed a guaranty for Matheney Ford’s debt.
As security for his guaranty, Cooper and his wife executed a deed
of trust on their residence in favor of AFLIC and AFIC. The deed
of trust was subordinate to a first deed of trust held by
Trustmark National Bank (Trustmark) as security for promissory
4 AFLIC’s commission deductions include the commission
income allocated to petitioner under sec. 482. The commission
deductions were claimed on the amended return to preserve the
deduction in the event respondent prevailed on the proposed sec.
482 adjustment.
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