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anticipated that their involvement would subject them to a tax
burden or possible financial hardship. Their actions, however,
are well documented, and the tax burden that results in these
circumstances has been considered, analyzed, and explained by
this and other courts. Petitioner signed an illusory document
reciting that a nonrecourse loan existed in the event that the
Internal Revenue Service looked into their insurance transaction.
Under these circumstances we do not see petitioner as an
unwitting participant. We also note that petitioners became
involved with Schwab in a subsequent and similar insurance
coverage scheme. In the subsequent transaction, petitioner had
become leery, refusing to sign any documents or to remit checks
to the insurance company in exchange for a check from Schwab. In
the subsequent transaction, Schwab paid the insurance company,
and petitioner applied for the insurance and was subjected to a
physical exam in order to be entitled to the insurance coverage.
In either situation, petitioner had to apply for insurance, take
a physical exam, and manifest to the insurer his intent to apply
for insurance. In exchange for those actions or consideration,
petitioners received the benefit of $1,250,000 of insurance
coverage, which was ultimately paid for by the agent, Schwab.
To reflect the foregoing,
Decision will be entered for
respondent.
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Last modified: May 25, 2011