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Petitioners contend that Pacific Life incorrectly computed
the amounts on Form 1099-R using the policy’s accumulated value
rather than the cash value. Petitioners argue that the
distributions were withdrawals of petitioner’s investment and
that Pacific Life classified the distributions as loans solely
for internal bookkeeping purposes. Petitioners allege that
petitioner withdrew his investment of $14,565 as well as
accumulated interest of $932 by October 1994 and that petitioner
received the cash surrender value of $384 in August 2001. Under
their theory, petitioners compute that they received a gross
distribution of $15,881 ($14,565 + $932 + $384) and that only the
accumulated interest of $1,316 that they actually received is
taxable. Petitioners’ contention is misplaced.
Petitioners now challenge for the first time Pacific Life’s
classification of the distributions as true loans. With respect
to each distribution, however, petitioner received a policy loan
statement clearly identifying each distribution as a policy loan.
In addition, petitioner received annual statements indicating the
outstanding loan balance including interest payable and the
effect of the loan balance to the cash surrender value of the
policy. We find it remarkable that petitioners contend that the
distributions were not loans when, throughout the life of the
policy, petitioner never contacted Pacific Life to dispute
Pacific Life’s classification of the distributions as loans.
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Last modified: May 25, 2011