- 64 -
of all serious purpose.'" Id. (quoting Gregory v. Helvering, 293
U.S. at 470).
A taxpayer's right to a deduction for interest on an
insurance policy loan is based on section 163, not section 264.
Golsen v. Commissioner, 54 T.C. 742, 755 (1970), affd. 445 F.2d
985 (10th Cir. 1971). Section 264 does not confer the right to a
deduction but simply denies, disallows, or prohibits deductions
that might otherwise be allowable under some other provision.
See id. at 756. Thus, while the parties agree that petitioner's
COLI plan meets the "four-of-seven test" of section 264(c)(1) and
would be excepted from the general disallowance rule of section
264(a)(3), section 264 does not confer a right upon petitioner to
take the deduction that would not otherwise be allowable under
section 163.
Petitioner cites the Senate Finance Committee's report
discussing the scope of section 264 prior to the 1964 amendment.
The report states that "under present law, no interest deductions
are denied where the taxpayer purchases an insurance contract
with the intention of borrowing the maximum amount on the
contract each year". S. Rept. 830, 88th Cong., 2d Sess. (1964),
1964-1 C.B. (Part 2) 505, 581. Based on this, petitioner argues
that Congress did not view the Supreme Court's decision in
Knetsch as foreclosing interest deductions based on the type of
Page: Previous 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 NextLast modified: May 25, 2011