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Rule references are to the Tax Court Rules of Practice and
Procedure.
The issues remaining for decision are: (1) Whether
petitioners are taxable on distributions totaling $38,117 from
the termination of a life insurance policy and an endowment
policy; (2) whether petitioners are entitled to deduct interest
on amounts borrowed against these two policies; and (3) whether
petitioners are liable for an accuracy-related penalty for a
substantial understatement of income tax.1
FINDINGS OF FACT
The parties have stipulated some of the facts, which are so
found. The stipulation of facts with attached exhibits is
incorporated herein by this reference. When they petitioned the
Court, petitioners were married and resided in Dallas, Texas.
In 1986, petitioner husband purchased a single premium life
insurance policy from First Colony Life Insurance Co. (First
Colony), paying a single premium of $25,000. On March 8, 1988,
petitioner wife purchased a single premium endowment policy from
National Western Life Insurance Co. (National Western), paying a
single premium of $50,000.
1 Petitioners stipulated that they failed to report taxable
interest income in the amount of $26 on their 1995 joint Federal
income tax return.
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