- 4 -
issues relevant to ascertaining the tax liability of the taxpayer
may shift to the Commissioner. See Higbee v. Commissioner, 116
T.C. 438, 442-443 (2001). Because the issue in this case is a
question of law, section 7491 is inapplicable, and the Court
decides the issue without regard to the burden of proof.
In general, with exceptions not applicable here, any amount
which is received under a life insurance contract before the
annuity starting date and which is not received as an annuity is
included in gross income to the extent it exceeds the investment
in the contract. Sec. 72(e)(1)(A), (5)(A), (C). The investment
in the contract is defined generally as the aggregate amount of
premiums or other consideration paid for the contract less
aggregate amounts previously received under the contract, to the
extent they were excludable from gross income. Sec. 72(e)(6).
The insurance premiums petitioner paid for the policy were
returned to him through the settlement. Petitioner does not deny
that the additional $2,326.33 is interest or that he received
such an amount. Indeed, he refers to it as "relief interest".
Petitioner contends that he paid $3,404.25 in interest on
the loans made against the cash value of his Prudential life
insurance policy, and that he incurred a loss of $1,077.92 on the
overall transaction. He argues that since he sustained a loss on
the overall transaction, there cannot be any income attributed to
him. The Court interprets petitioner's argument to be that if
Page: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011