Verl W. and Frances M. Haderlie - Page 6

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          to that time Schwab approached petitioner with another insurance            
          transaction with Columbus Life Insurance Co. (Columbus).                    
               The Columbus transaction was for life insurance coverage               
          beginning during 1993 and was, in most respects, substantially              
          similar to the Royal transaction.  The Columbus transaction                 
          differed from the Royal transaction as to the amount of coverage            
          ($1,000,000 as opposed to $1,250,000), the absence of a document            
          indicating a nonrecourse loan, and in the Columbus transaction              
          petitioner refused to execute a premium check to Columbus.  In              
          the Columbus transaction, Schwab paid petitioner's premium                  
          directly to Columbus.                                                       
               Petitioners did not report any income in connection with the           
          Royal/Schwab insurance arrangement on their 1991 Federal income             
          tax return.  Respondent determined that the $40,653 premium (for            
          1 year) on the Royal life insurance policy was income to                    
          petitioners for 1991.                                                       
               Transactions substantially similar to the one in this case             
          were considered in Wentz v. Commissioner, 105 T.C. 1 (1995), and            
          Woodbury v. United States, 72 AFTR 2d 93-6140, 93-2 USTC par.               
          50,528 (D.N.D. 1993), affd. per curiam without published opinion            
          27 F.3d 572 (8th Cir. 1994).  In those cases, taxpayers who had             
          received the benefit of life insurance coverage in situations               
          where the agent kicked back the premium were found to have income           

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