Brown, et ux. v. Comr., T.C. Memo. 2011-83

(taxpayer (attorney married to spouse who has an LLM in taxation) borrowed against life insurance policy, let policy lapse and insurance company applied cash value of policy to policy indebtedness; taxpayers did not report any gain or loss attributable to the policy; life insurance company sent taxpayer Form 1099-R showing a distribution of $37,365.06 with taxable amount of $29,093.30; accuracy-related penalty imposed).