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benefit to the dealerships. The Government further contends that
the dealerships are not in the insurance business and should not
be allowed to deduct insurance expenses.
First, the Government is mistaken in treating the
dealerships and the dealer-related agencies as separate,
autonomous organizations. As we indicated earlier, the
dealerships provide the service of offering, explaining, and
calculating credit insurance. The agencies have no employees and
are merely shadow entities; they do not in fact sell insurance.
The agencies receive the commissions on the premiums, but that
result is required by Michigan law. To be sure, Michigan law
governs as to the rights created and the relationships involved,
but Federal law is determinative as to tax consequences. Morgan
v. Commissioner, 309 U.S. 78, 80-81 (1940). See United States v.
National Bank of Commerce, 472 U.S. 713, 722 (1985); United
States v. Mitchell, 403 U.S. 190, 197 (1971); Bank One Ohio Trust
Co., N.A. v. United States, 80 F.3d 173, 175 (6th Cir. 1996);
Estate of Agnello v. Commissioner, 103 T.C. 605, 614 (1994).
Second, the Government contends that the dealerships should
be denied the deductions because they are not in the insurance
business. The Government fails to recognize the dealerships'
role in fact in the sale of credit insurance and in that
connection the breadth of a dealership's business. A motor
vehicle dealership does much more than merely sell vehicles.
Among other things, it arranges for financing of installment
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