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agreements it had made, so it began sending letters to all its
contributors encouraging them to terminate their policies. If a
contributor agreed, NCF would be able to recover the unearned
premiums. But without a contributor’s agreement to terminate,
NCF’s investment was at risk. If the contributor died quickly,
NCF would receive a great deal of money; but if he outlived the
time it took for the life insurance company to earn its premiums
on NCF’s accelerated payments, NCF would get nothing.
Roark got such a letter, but he never agreed to terminate
the policy. He also never contributed any more money to NCF once
the legislation was introduced. But he did make another payment
to IDS Life in December 2001 to prevent the insurance policy from
lapsing. Then, in March 2003, he reduced the policy’s death
benefit from $2.2 million to $1.1 million. This guaranteed that
the Trust would receive at least some death benefit even if he
never paid another premium.
If the payments to NCF are counted, the Roarks contributed a
total of $220,966 to charity during 1998. Due to rules that set
an annual ceiling on charitable contribution deductions, sec.
170(d)(1), the Roarks deducted only $166,031 in 1998 and carried
over the remainder to 1999. The IRS issued a notice of
deficiency for the 1998 and 1999 tax years that disallowed the
$180,000 in contributions to NCF. The Commissioner later reduced
the disputed amount because NCF never made a payment on the
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Last modified: May 25, 2011