Court Opinion

ID: 4485361
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:17:21.807854+00
Date Added: 2024-06-11T15:04:30.504120
License: Public Domain

Whitaker, J., concurring: As the majority points out, a taxpayer which self-insures cannot deduct sums set aside as a reserve for payment of unmatured claims, whether or not roughly equivalent to premiums for insurance against the particular risks. Pan-American Hide Co. v. Commissioner, 1 B.T.A. 1249, 1250 (1925); L.A. Thompson Scenic Railway v. Commissioner, 2 B.T.A. 664 (1925). By analogy see Crescent Wharf & Warehouse Co. v. Commissioner, 59 T.C. 751 (1973), revd. 518 F.2d 772 (9th Cir. 1975). It is too obvious for discussion that generally a taxpayer cannot be allowed to do indirectly through a wholly owned subsidiary that which it is prohibited from doing directly. Hence by merely qualifying a subsidiary as an insurance company, a parent cannot deduct sums equivalent to insurance premiums which it pays to its subsidiary. And the same tax analysis must apply where the premiums are paid indirectly to the subsidiary as reinsurance. Carnation (Carnation Co. v. Commissioner, 71 T.C. 400 (1978), affd. 640 F.2d 1010 (9th Cir. 1981)) in my judgment really stands for this proposition and it is time we said so. It is on this basis that I would hold petitioner is precluded from deducting the premiums paid to Fremont to the extent of the 92 percent that by prearrangement was returned to its subsidiary Lombardy, the sole business of which was reinsurance of petitioner’s insurance with Fremont. We do not have before us other fact situations such as those postulated by the dissent. Resolution of those different and more difficult issues should await another day. "Sufficient unto the day is the evil thereof.” 6 Matthew 34.