- 43 -
Rose v. Commissioner, 868 F.2d 851, 854 (6th Cir. 1989), affg. 88
T.C. 386 (1987); Kirchman v. Commissioner, supra; United Parcel
Serv. of Am., Inc. v. Commissioner, T.C. Memo. 1999-268.37
Economic substance, in this context, is determined by
objective evaluation of changes in economic position of the
taxpayer (economic effects) aside from tax benefits. See
Kirchman v. Commissioner, supra at 1492; accord Knetsch v. United
States, supra at 366 ("nothing of substance to be realized * * *
from this transaction beyond a tax deduction"); ACM Partnership
v. Commissioner, supra at 248; Sheldon v. Commissioner, supra.
The inquiry into whether there was a legitimate business purpose
involves a subjective analysis of the taxpayer's intent. See ACM
Partnership v. Commissioner, supra at 247; Kirchman v.
Commissioner, supra at 1492.
We will begin with an examination of the economic substance
of petitioner's 1993 COLI plan. In doing so, we focus on the
COLI transaction in its entirety rather than any single step.
See Kirchman v. Commissioner, supra at 1493-1494.
Petitioner's 1993 purchase of COLI on the lives of
approximately 36,000 of its employees was done pursuant to an
37In certain situations courts have held that a transaction
that lacks economic substance, other than the production of a tax
benefit, is a substantive sham regardless of the motive of the
taxpayer. See Knetsch v. United States, supra at 365; Dewees v.
Commissioner, 870 F.2d 21, 35 (1st Cir. 1989); Kirchman v.
Commissioner, supra at 1492.
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