Tower Loan of Mississippi, Inc. - Page 9

                                        - 9 -                                         
          issue, to receive the commission income.  Petitioner, in this               
          regard, relies primarily on the Supreme Court’s decision in                 
          Commissioner v. First Security Bank, 405 U.S. 394 (1972), a case            
          whose facts are strikingly similar to those now before us.  In              
          First Security, two banks, wholly owned subsidiaries of a holding           
          company, offered credit insurance to their borrowers.  The                  
          premiums would be forwarded to an independent insurer, which                
          would then reinsure the policies with an insurance company which            
          was also wholly owned by the holding company.  The subsidiary               
          insurance company would receive 85 percent of the premiums, and             
          the outside insurance company, which furnished actuarial and                
          accounting services, kept the remaining 15 percent.  The banks              
          received no commissions or payments for selling the insurance.              
          The Commissioner, pursuant to section 482, determined that a                
          percentage of the premiums was allocable to the banks to properly           
          reflect commission income.                                                  
               The Supreme Court set aside the Commissioner’s allocation.             
          The Court emphasized that, under Federal law, the banks were                
          prohibited from receiving commissions.  Id. at 401.  Since the              
          banks could not have legally received that income, the Court                
          determined that the holding company did not improperly utilize              
          its control over its subsidiaries to distort income.  Id. at 403-           
          404.  In its analysis, the Court found no decision of the Supreme           
          Court wherein a person had been found to have taxable income that           
          he did not receive and that he was prohibited from receiving.               

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