- 37 -
equal to premiums paid (i.e., Winn-Dixie's tax basis) and apply
the withdrawal to repay an equal amount of loan." The booklet
indicated that the result of such a withdrawal and repayment is a
policy with a greatly reduced cash value, substantially all of it
borrowed.
The third strategy, the aggressive tax strategy, suggested
that under the revised statute, deductions were disallowed only
with respect to policies on the life of an individual who was an
officer or employee or was financially interested in petitioner's
trade or business. The booklet further indicated that counsel
for Coventry believed that a strong argument could be made that
the disallowance described by the statute did not apply where the
insured was a former officer or employee or was not financially
interested. Based on this argument, the booklet gave an example
which assumed an additional $200 million of aggregate
indebtedness could be attributed to petitioner's former employees
upon whom policies were still maintained. As a result of the
additional $200 million of aggregate indebtedness, the booklet
concluded that the tax savings in each year would be equal to 39
percent of 11 percent of $200 million or $8,580,000, for as long
as the loans remained in force.
In a letter to Mr. Qureshi dated September 8, 1997, Mr.
McCook indicated that in light of the passage of the legislation
pertaining to leveraged COLI, petitioner was working toward a
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