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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.
OPINION
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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