Berger Chevrolet, Inc. - Page 13

                                                - 13 -                                                  
            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                                

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  Next

Last modified: May 25, 2011