Tower Loan of Mississippi, Inc. - Page 5

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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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