Clougherty Packing Co. v. Commissioner
United States Tax Court
Petitioner's wholly owned subsidiary incorporated a wholly owned captive insurance subsidiary (Lombardy). Petitioner negotiated coverage for its workers' compensation insurance liabilities with Fremont, an unrelated insurance carrier. In addition, Fremont negotiated with petitioner to have Lombardy reinsure portions of petitioner's risk which was insured with Fremont. Under this agreement, 92 percent of the premiums paid by petitioner to Fremont were ceded to Lombardy.
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Petitioner's wholly owned subsidiary incorporated a wholly owned captive insurance subsidiary (Lombardy). Petitioner negotiated coverage for its workers' compensation insurance liabilities with Fremont, an unrelated insurance carrier. In addition, Fremont negotiated with petitioner to have Lombardy reinsure portions of petitioner's risk which was insured with Fremont. Under this agreement, 92 percent of the premiums paid by petitioner to Fremont were ceded to Lombardy. Held, petitioner failed to shift 92 percent of its risk of loss; therefore, 92 percent of its premiums paid to Fremont is not…
1Opinion of the Court
OPINION
Goffe, Judge:
The Commissioner determined deficiencies in petitioner’s Federal income tax for the taxable years ended July 29, 1978, and July 28, 1979, in the amounts of $370,944 and $628,202, respectively. The sole issue for decision is whether petitioner is entitled to deduct, as an ordinary and necessary business expense, the entire amount paid to an unrelated insurance carrier as insurance premiums for workers’ compensation coverage where the unrelated carrier reinsures 92 percent of such risk with the wholly owned captive insurance company of petitioner’s wholly owned subsidiary…
2Cases cited7 opinions
- Moline Properties, Inc. v. CommissionerSupreme Court of the United States · 1943
- Helvering v. Le GierseSupreme Court of the United States · 1941
- Carnation Company v. Commissioner of Internal RevenueCourt of Appeals for the Ninth Circuit · 1981
- Carnation Co. v. CommissionerUnited States Tax Court · 1978
- Steere Tank Lines, Inc. v. United StatesCourt of Appeals for the Fifth Circuit · 1978
2 more not listed; retrieve them via the Exa API.
3Cited by42 opinions
- Clougherty Packing Company v. Commissioner of Internal RevenueCourt of Appeals for the Ninth Circuit · 1987
- Gulf Oil Corporation, in No. 89-2049 v. Commissioner of Internal Revenue. Commissioner of Internal Revenue, in No. 89-2050 v. Gulf Oil CorporationCourt of Appeals for the Third Circuit · 1990
- Humana Inc. v. Commissioner of Internal RevenueCourt of Appeals for the Sixth Circuit · 1989
- Beech Aircraft Corporation v. United StatesCourt of Appeals for the Tenth Circuit · 1986
- Sears, Roebuck & Co. v. CommissionerUnited States Tax Court · 1991
37 more not listed; retrieve them via the Exa API.