- 67 -
section 163. The same reasoning applies to the administrative
fees associated with the COLI plan.49 They were incurred in
connection with, and were an integral part of, a sham transaction
and, as a result, are not deductible. See Karr v. Commissioner,
924 F.2d at 1022-1023; Kirchman v. Commissioner, 862 F.2d 1486;
Lee v. Commissioner, 155 F.3d 584 (2d Cir. 1998). We, therefore,
uphold respondent's disallowance of these deductions.
Decision will be entered
under Rule 155.
49Respondent argues that the administrative fees should be
disallowed pursuant to sec. 265. Because we have held that the
administrative fees must be disallowed as the product of a sham,
we have no need to consider disallowance under sec. 265.
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