- 12 - Consequently, for Federal income tax purposes there was no debt between the Waltons and Charles Sutter. See Beaver v. Commissioner, 55 T.C. 85 (1970). Pursuant to the apparent arrangement among Charles Sutter, the Waltons, and the Schwabs, the DDI note was to be repaid not by Charles Sutter, but by the Schwabs, or an entity controlled by the Schwabs. This is in fact what happened not only in this case, but with other customers of the Schwabs as well who received funds from DDI. As far as Charles Sutter was concerned, the DDI note was a nullity. Disregarding the DDI note, it follows from our holding in Wentz v. Commissioner, supra, see also Haderlie v. Commissioner, supra, that the fair market value of the life insurance coverage Charles Sutter received from Columbus, measured by the amount of the first-year premium for that insurance, must be included in petitioners' income for 1992, and we so hold. Respondent's argument that the Stable and RMR notes were also illusory is likewise persuasive. There is credible evidence in the record that those notes were afterthoughts, designed not to represent legitimate debt between the makers and holders, but to disguise transactions that would otherwise lead to the Federal income tax consequences that are involved in this proceeding. The manner in which the Schwabs orchestrated each transaction through entities that they controlled, coupled with the extent of the compensation they received from the insurance companies,Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011