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itself had only one function and that was to generate tax
deductions which were to be used to offset income from its
business and thereby reduce petitioner's income tax liabilities
in each year.
Petitioner also argues that the purchase of the COLI
policies permitted it to increase group life benefits offered to
Winn-Flex participants. It is true that petitioner offered an
additional $5,000 in life insurance benefits to employees who
agreed to allow petitioner to purchase COLI policies on their
lives. However, this was done at the suggestion of Coventry in
order to obtain the employees' consent to have their lives
insured. There was no relationship between death benefits under
the COLI policies and the relatively small $5,000 employee death
benefit. All policies bore a $3,000 annual premium, and death
benefits under the policies were based on that premium amount and
the age of the employee. Also, petitioner had a high turnover
among its employees, and the $5,000 death benefit expired when
the insured's employment with petitioner ended. As a result,
Coventry advised petitioner that the additional $5,000 in
coverage could be provided at an insignificant cost. Based on
the record, we do not believe that the purpose of the COLI plan
was to fund employee benefits.
Petitioner's COLI plan required a relatively small amount of
cash investment by petitioner and charged a high rate of interest
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