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of such interest is deductible in 1997 and 80% thereof
is deductible in 1998.
* * * * * * *
In the aggregate, the three enrollments cover 55,740
lives with aggregate outstanding loans of about $500
million at interest rates averaging 11%. At a 39% tax
bracket, these policies would produce tax deductions
worth $21,450,000 per year.
Under the amended law, assuming aggregate indebtedness
of $195 million on the "best" 20,000 policies and a
Moody's rate of 8% per annum, the following savings
will be available:
Calendar 1996 $6,084,000
Calendar 1997 5,475,600
Calendar 1998 4,867,200
The booklet next identified three basic exit strategies for
petitioner. The three strategies were listed as the policy
surrender, policy unwind, and aggressive tax strategy. The
policy surrender strategy generally entailed the cancellation or
surrender of the policy and the receipt by petitioner of the net
cash value of the policy. The booklet recommended under this
strategy that petitioner maintain the policies on 20,000 lives in
fiscal years 1996 and 1997.
With respect to the policy unwind strategy, in lieu of
surrendering the policies, petitioner was informed that it could
keep the policies in force and allow the unrealized gains related
to the policies to be paid out eventually as tax-free death
benefits. The booklet further stated that in order to unwind a
policy, petitioner "would withdraw a portion of the cash value
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