Phoenix Mut. Life Ins. Co. v. Commissioner
United States Tax Court
P, a life insurance company, received prepayment premiums upon the early retirement of mortgage loans made to corporate borrowers after 1954. The mortgage loans, which were held by P as part of its investment activities, provided for stated interest at regular intervals and were not made at a discount.
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P, a life insurance company, received prepayment premiums upon the early retirement of mortgage loans made to corporate borrowers after 1954. The mortgage loans, which were held by P as part of its investment activities, provided for stated interest at regular intervals and were not made at a discount. Held: The prepayment premiums are to be treated as long-term capital gain and, as such, are excludable from P's gross investment income under sec. 804(b). Prudential Insurance Co. of America v. Commissioner, 90 T.C. 36 (1988), revd. 882 F.2d 832 (3d Cir. 1989), will no longer be followed.
1Opinion of the Court
WELLS, Judge:
Respondent determined a deficiency in petitioner’s Federal income tax for the year ended December 31, 1980, in the amount of $6,223,612.
The only issue we consider in this opinion1 is whether “prepayment premiums” received by petitioner upon the early retirement of mortgage loans made to corporate obligors constitute long-term capital gain excluded from gross investment income under section 804(b).2
FINDINGS OF FACT
Some of the facts have been stipulated for trial pursuant to Rule 91. The stipulations and accompanying exhibits are adopted by this reference. When the petition in the…
2Cases cited22 opinions
- Jack E. Golsen and Sylvia H. Golsen v. Commissioner of Internal RevenueCourt of Appeals for the Tenth Circuit · 1971
- D. Ginsberg & Sons, Inc. v. PopkinSupreme Court of the United States · 1932
- Commissioner v. Gillette Motor Transport, Inc.Supreme Court of the United States · 1960
- Willcutts v. BunnSupreme Court of the United States · 1931
- Fairbanks v. United StatesSupreme Court of the United States · 1939
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3Cited by4 opinions
- Travelers Insurance v. United StatesUnited States Court of Claims · 1992
- Phoenix Mut. Life Ins. Co. v. CommissionerUnited States Tax Court · 1991
- Phoenix Mut. Life Ins. Co. v. CommissionerUnited States Tax Court · 1991
- Phoenix Mut. Life Ins. Co. v. CommissionerUnited States Tax Court · 1991