Winn-Dixie Stores, Inc. and Subsidiaries - Page 45




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          values, and death benefits.  Petitioner was to be the owner and             
          beneficiary of the policies.  Detailed projections were prepared            
          to demonstrate the financial impact of the plan.  The projections           
          assumed a high rate of interest (11.06 percent) would be charged            
          to petitioner on its policy loans.  This would be countered by a            
          high rate of interest to be credited to petitioner on the portion           
          of the gross cash surrender value that petitioner had borrowed              
          against.  The crediting rate was 40 basis points below the rate             
          charged to petitioner on its policy loans (10.66 percent).  The             
          rate to be credited on the unborrowed portion of the gross cash             
          surrender value was 4 percent.  Policy loans by petitioner would            
          be used to pay most of the premiums and interest with the result            
          that petitioner's net equity in the policies would remain                   
          relatively small.  Death benefits would be applied to reduce                
          outstanding policy loans.                                                   
               The profit and loss statements in the projections illustrate           
          the pretax effect and the after-tax effect that the COLI plan               
          would have on petitioner.  The difference between pretax and                
          after-tax effects was based on the income tax savings that would            
          result from deducting policy loan interest and administrative               
          fees.  Policy loan interest was clearly the dominant element.               
          All the various projections prepared before the actual purchase             
          of the policies in June 1993 show that the pretax effect on                 







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