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policies on each of the individuals. On July 1, 1983, Mr. Thorpe
executed an application for disability insurance with Time
Insurance Co. as the insurer. On November 4, 1989, Mr. Echols
executed an application, as owner, for disability insurance with
Time Insurance Co. ETCO paid the insurance premiums on both
disability insurance policies and, subsequently, deducted the
expenses on its tax returns for the years in issue. ETCO also
maintained liability, workman's compensation, commercial auto,
medical, excess liability, and casualty and surety insurance.
In 1988, Mr. and Mrs. Thorpe signed two vehicle lease
agreements on behalf of ETCO for two vehicles they drove during
the years in issue. ETCO made the lease payments for both of the
automobiles during the years in issue. Both lease agreements
listed Mr. and Mrs. Thorpe as the lessees of the automobiles, and
both automobiles were leased from the same company. The first
lease was for a 1988 Lincoln Towncar and was dated May 10, 1988.
Paragraph 24 of the lease agreement on the Lincoln contained two
boxes in which the lessees could indicate that the automobile was
intended to be used for either business purposes or personal use.
Neither box was marked to indicate that the lessees intended to
use the Lincoln for either business or personal use. The second
lease was for a 1988 Mercury Colony Park and was signed July 20,
1988. Paragraph 24 of the lease agreement for the Mercury
specifically designated the vehicle's use as being for business.
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