Winn-Dixie Stores, Inc. and Subsidiaries - Page 1

                                   113 T.C. No. 21                                    

                               UNITED STATES TAX COURT                                

               WINN-DIXIE STORES, INC. AND SUBSIDIARIES, Petitioner v.                
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 5382-97.             Filed October 19, 1999.                

                    P entered into a leveraged corporate-owned life                   
               insurance (COLI) program in which it purchased life                    
               insurance on approximately 36,000 of its employees and                 
               systematically borrowed against the cash value of the                  
               policies to fund the premiums.  The COLI program was                   
               designed so that annual premiums, fees, and policy loan                
               interest would exceed the projected annual death                       
               benefits and net cash value of the policies.  The                      
               program was designed to generate large amounts of                      
               interest on petitioner's policy loans that petitioner                  
               intended to deduct for income tax purposes.  The income                
               tax savings from the deductions for interest and fees                  
               were projected to be substantially in excess of the                    
               projected net costs of maintaining the COLI program.                   
               In each year of operation, the COLI program projected a                
               pretax loss and an after-tax gain.                                     
                    Held:  P's broad-based leveraged COLI program                     
               lacked economic substance and business purpose (other                  
               than tax reduction) and is therefore a sham for tax                    
               purposes.  As a result, interest on P's COLI policy                    

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