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the years in issue on policies which insure the lives of ETCO's
corporate officers, notwithstanding the fact that ETCO was the
beneficiary of the policies. ETCO also argues that premiums paid
on disability policies for Mr. Thorpe and Mr. Echols are
deductible by ETCO.
Section 264(a)(1) specifically provides that no deduction
shall be allowed for premiums paid on any life insurance policy
when the taxpayer is directly or indirectly a beneficiary under
the policy. ETCO paid and deducted the premiums for insurance
policies on the lives of Mr. and Mrs. Thorpe and Mr. Echols.
ETCO was also the owner and beneficiary on each of the policies.
As such, section 264(a)(1) disallows a deduction of any amounts
paid by ETCO in connection with the life insurance policies.
With respect to the disability insurance policies on Mr.
Thorpe and Mr. Echols, respondent cites Rugby Prods. Ltd. v.
Commissioner, 100 T.C. 531 (1993), as authority for disallowing
ETCO's deductions for the disability payments in the years in
issue. Generally, where an employee has all the rights of
ownership in a disability insurance policy, and none of the
benefits are payable to the corporation, the corporation may pay
and deduct premiums on the disability policy in accordance with
section 162.7 Rugby Prods. Ltd. v. Commissioner, supra at 538-
541.
7Respondent does not argue that the deductions were not
ordinary and necessary business expenses under sec. 162.
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