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HARCO HOLDINGS v. UNITED STATES

December 21, 1990

HARCO HOLDINGS, INC. and Subsidiaries, Plaintiffs,
v.
UNITED STATES OF AMERICA, Defendant



The opinion of the court was delivered by: NORGLE

 CHARLES R. NORGLE, UNITED STATES DISTRICT JUDGE

 Before the court is plaintiff Harco Holdings, Inc.'s ("Harco") motion for summary judgment. For the reasons discussed below, the motion is denied.

 FACTS *fn1"

 On September 15, 1979, Harco filed a timely federal corporate income tax return for the taxable year ending on December 31, 1978. This filing consolidated the tax returns of Harco and three of its wholly-owned subsidiaries. Along with this filing, Harco submitted full payment of the $ 2,559,397 in taxes computed on the return.

 On February 3, 1982, Harco timely filed with the IRS a refund claim for $ 790,794. In this refund claim, Harco asserted that one of the subsidiaries included in the September 15, 1979 tax return, Association Life Insurance Company, Inc. ("Association Life") qualified as a life insurance company for federal tax purposes for the 1978 taxable year. The parties agree that if Association Life so qualified, then both it and its wholly-owned subsidiary (Harco National Insurance Company), were each required to file separate federal income tax returns -- and neither should have been included in the consolidated return filed by Harco in 1979. Had these companies filed separate tax returns, the combined total tax due from these returns, according to Harco, would have been $ 1,768,603, $ 790,794 lower than the tax actually paid by Harco. *fn2"

 On May 19, 1987, the IRS issued a statutory notice of disallowance for Harco's $ 790,794 refund claim. Harco has not received any credit or refund for any amounts asserted in its refund claim. Harco filed this action on May 15, 1989 to obtain the refund which was disallowed by the IRS. It now moves for summary judgment.

 Rule 56 (c) of the Federal Rules of Civil Procedure provides that summary judgment:

 
shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

 Here, the parties agree that there is no genuine issue as to any material fact and that the dispute is limited to an interpretation of the applicable law. The sole question of law presented by this action is whether Association Life qualified as a life insurance company for federal income tax purposes in 1978. Section 801 of the Internal Revenue Code of 1954 (the "Code"), as in effect during 1978, defines "life insurance company" as follows:

 
ยง 801. Definition of life insurance company
 
(a) Life insurance company defined. -- For purposes of this subtitle, the term "life insurance company" means an insurance company which is engaged in the business of issuing life insurance and annuity contracts (either separately or combined with health and accident ...

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