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* 3. "the surrender value, they constituted payment for earned insurance and were current expenses. -. Appeal of £.4.armstrong, L B.T.u.296, The surrener value oO @ policy was the measure of the investment and upon the surrender there was no capital lost."
2 In Cent wood Preservins Com ve Commissioner
69 Fed. (24) 967 (1954) the insuring coupany sold the policies to the retiring officers-icztie cash surrencer value of the policies. «he Court refused to allow the «#e
duction stating:
"The cost of an asset is the reel question heree It is obvious that cost is not the totel suount paid in aS premiums, since coutinuing insurance protection is part of the consiceretion for the contracte The part of the premiums which represents annusl insurance protection has been earned end used. ihe other part of the premium is an investment built up as a reserve until the policy is uetured or surreniered. If it is airrendcered, the holder is entitled to the cash surrencer value from the the insurer, or, roughly, the return of the equivalent of his investment after the cost of annusl pro-. tection is deducted from the mweniums.
The petitioner in this case made no effort to show the reserve carried by the insurer on these policies. But cost is approximately reflected by ‘the eash surrender value of the policies. This was the value that the petitioner's affiliates received by selling the policies to their peg to gS aphal te and consequently there were no gains nor losses resulting froz the transaction."
a contrary rule is set up in the cese of Forbes Lithograph wfe Co. ve. White, 42 yea (2d) 267. in that case plaintiff had insured tue lives of four of its officers.
Upon their resignetion, it surrencered the policies for their caso value enc claimed tne loss of 517,799.06 as a cecuctions The vommissioner disallowed the decuction. The Listrict Court sustained the deduction stating:
"The prewiums paid were by the Statute not deductible es business expense. The exact nature
of premium peyments on life insurance policies of this charecter is a question open to auch mer