V.R. DeAngelis M.D.P.C. & R.T. Domingo M.D.P.C., V. R. DeAngelis M.D.P.C., Tax Matters Partner, et al. - Page 32




                                       - 32 -                                         
          DeAngelis policy) were paid timely,14 and PUAR was purchased with           
          additional premiums of $98,403.36 in 1993 and $97,028.36 in 1994.           
          In 1996, the premium due on this policy as of December 28, 1995,            
          was paid timely with a dividend withdrawal of $16,658.17 and a              
          portion of a withdrawal of $123,004.98 from the PUAR.15  As to              
          the withdrawal from the PUAR, $64,938.47 was used to pay the                
          December 28, 1995, premium on this policy, and $58,066.51 was               
          used to pay the December 28, 1995, premium on the DeAngelises               
          survivor whole life policy.  In 1997, the premium due on December           
          28, 1996, on the Dr. DeAngelis policy was paid timely with a                
          dividend withdrawal of $15,247.77 and a withdrawal of $66,348.87            
          from the PUAR.  The premium due on December 28, 1997, was not               
          paid timely, and the policy lapsed for nonpayment of premiums.              
          MetLife converted the policy to nonforfeiture extended term                 
          insurance with a face value of $2,192,891 through August 21,                
          2000, at which time it was set to be depleted of its cash value             
          and thus to terminate without value.16                                      


               14 Although the premiums were not actually paid until after            
          the due dates, we consider them to have been paid “timely”.  To             
          this end, we understand each of the subject insurance policies to           
          have allowed a grace period after the due date so that a premium            
          paid during that period would be timely in the sense that the               
          policy would not lapse.                                                     
               15 A dividend withdrawal relates to a dividend payable on a            
          policy.                                                                     
               16 Extended term insurance is a life insurance policy                  
          nonforfeiture option that may be exercised when the policy lapses           
                                                             (continued...)           





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