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that these commissions were not paid to acquire income-producing
capital assets, unlike the ceding commissions in Colonial
American Life Ins. Co. v. Commissioner, 491 U.S. 244 (1989).
In Colonial American, the Supreme Court stated that a ceding
commission is "an up-front, one-time payment to secure a share
in a future income stream." Id. at 260. According to
respondent, the ceding commissions were not paid by petitioner
for the right to realize income from the reinsured policies
because the Agreements were designed to return to petitioner
income approximately equal to the amount of the commissions.
Respondent bears the burden of proof on this issue. Rule 142(a);
Estate of Bowers v. Commissioner, 94 T.C. 582, 595 (1990).
We find respondent's argument unpersuasive. The short
answer to this question is that the ceding commissions were paid
to allow petitioner to share in the future income stream from the
reinsured policies. Petitioner entered into the Agreements and
incurred the related commissions for valid and substantial
business reasons. The ceding commissions were incurred in arm's-
length transactions between unrelated parties. We find that
these ceding commissions were “part of the purchase price to
acquire the right to a share of future profits”, Colonial
American Life Ins. Co. v. Commissioner, supra at 251, and, as
such, were capital expenditures that must be amortized over the
life of the Agreements, id. at 252-253. Respondent has not
proven otherwise.
We have considered all arguments made by respondent for a
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