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loans is not deductible interest on indebtedness within
the meaning of sec. 163, I.R.C. The administrative
fees associated with the COLI program are not
deductible because they were incurred in furtherance of
a sham.
Michael J. Henke, Tegan M. Flynn, Cary D. Pugh, Thomas
Crichton IV, Robert H. Cox, and Thomas P. Marinis, Jr., for
petitioner.
Nancy B. Herbert, Jeffrey L. Bassin, James D. Hill, and
Michelle A. Missry, for respondent.
RUWE, Judge: Respondent determined a deficiency of
$1,599,176 in petitioner's Federal income tax for its tax year
ending June 30, 1993. After concessions, the issue is whether
deductions petitioner claimed for policy loan interest and
administrative fees associated with certain of petitioner's
corporate-owned life insurance (COLI) policies are deductible.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulations of facts are incorporated herein by this
reference. At the time the petition was filed, petitioner was a
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