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The parties refer to this exception as the "four-of-seven test".
The parties agree that petitioner's COLI policies meet the
requirements of the four-of-seven test.48 The parties disagree
* * * * * * *
(c) Exceptions.--Subsection (a)(3) shall not apply to
any amount paid or accrued by a person during a taxable
year on indebtedness incurred or continued as part of a
plan referred to in subsection (a)(3)--
(1) if no part of 4 of the annual
premiums due during the 7-year period
(beginning with the date the first premium on
the contract to which such plan relates was
paid) is paid under such plan by means of
indebtedness,
(2) if the total of the amounts paid or
accrued by such person during such taxable
year for which (without regard to this
paragraph) no deduction would be allowable by
reason of subsection (a)(3) does not exceed
$100,
(3) if such amount was paid or accrued
on indebtedness incurred because of an
unforeseen substantial loss of income or
unforeseen substantial increase in his
financial obligations, or
(4) if such indebtedness was incurred in
connection with his trade or business.
For purposes of applying paragraph (1), if there is a
substantial increase in the premiums on a contract, a
new 7-year period described in such paragraph with
respect to such contract shall commence on the date the
first such increased premium is paid.
48The parties also agree that petitioner's COLI policies
meet the definition of a life insurance contract for purposes of
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