Matthies v. Comm'r
United States Tax Court
A profit-sharing plan of Ps' wholly owned S corporation bought a life insurance policy on Ps' lives with funds rolled over from H's IRA. The profit-sharing plan later sold the policy to H for $ 315,023, which slightly exceeded the policy's cash surrender value, net of a $ 1,062,461 surrender charge. For income tax purposes, Ps valued the policy at its net cash surrender value and reported no gain on the transaction.
Read the full summary
A profit-sharing plan of Ps' wholly owned S corporation bought a life insurance policy on Ps' lives with funds rolled over from H's IRA. The profit-sharing plan later sold the policy to H for $ 315,023, which slightly exceeded the policy's cash surrender value, net of a $ 1,062,461 surrender charge. For income tax purposes, Ps valued the policy at its net cash surrender value and reported no gain on the transaction. R determined that the policy should be valued without any reduction for surrender charges and that the bargain sale of the insurance policy gave rise to taxable income to Ps.…
1Opinion of the Court
Thornton, Judge:
For each of petitioners’ taxable years 2000 and 2001, respondent determined a $294,925 deficiency and a $58,985 accuracy-related penalty for negligence under section 6662(a).1 After concessions, the issues for decision are: (1) Whether in 2000 petitioners realized $1,053,304 of taxable income from a bargain sale to Karl L. Matthies (petitioner) of a life insurance policy by a profit-sharing plan created for petitioners’ wholly owned S corporation; and (2) whether for 2000 petitioners are liable for the section 6662(a) accuracy-related penalty for negligence.
FINDINGS OF FACT
When…
2Cases cited22 opinions
- Welch v. HelveringSupreme Court of the United States · 1933
- Neely v. CommissionerUnited States Tax Court · 1985
- Commissioner v. LoBueSupreme Court of the United States · 1956
- Commissioner v. SmithSupreme Court of the United States · 1945
- Guggenheim v. RasquinSupreme Court of the United States · 1941
17 more not listed; retrieve them via the Exa API.
3Cited by5 opinions
- Schwab v. Comm'rUnited States Tax Court · 2011
- Schwab v. CommissionerCourt of Appeals for the Ninth Circuit · 2013
- Matthies v. Comm'rUnited States Tax Court · 2010
- Michael P. Schwab and Kathryn J. Kleinman v. CommissionerUnited States Tax Court · 2011
- Schwab v. Comm'rUnited States Tax Court · 2011