- 48 -
first-year income tax savings from the COLI plan of $4,480,000.
This amount is composed of tax savings of $4,368,000 attributable
to a deduction of accrued first-year interest on policy loans of
$11,191,000 and tax savings of $113,000 attributable to a
deduction of first-year administrative fees of $290,000. Based
on this, the projected "after-tax earnings effect" for the first
policy year was $292,000.41 Similar projections for each of the
following 59 years show that while the "pretax earnings effect"
of the plan resulted in losses, the "after-tax earnings effect"
continued to be positive in each year reaching its peak in the
year 2008 when the "after-tax earnings effect" would be
$63,965,000. This amount was arrived at by subtracting the
pretax loss of $9,182,000 from projected income tax savings of
$73,146,000.42 The projected income tax savings of $73,146,000
were attributable to tax deductions for interest of $187,279,000
and administrative fees of $276,000. The June 1993 projections
indicate that had the 1993 COLI plan remained in effect through
the year 2052, petitioner's total pretax loss over 60 years would
have been $681,922,000 but that the total tax saved because of
policy loan interest and fee deductions would have exceeded $3
41The above figures were taken from the June 1993
projections reflected in appendix B. The totals vary by $1,000,
apparently due to rounding off the last three digits.
42See supra note 41.
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