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relevant to this case, Eagle held licenses to conduct the
insurance business in the States of Washington and Alaska.
Beginning on January 1, 1985, and through the subsequent
years relevant to this case, the stevedoring affiliates of
Services Group insured their LHW Act risks with Eagle on a direct
basis. After the splitup, Eagle continued to insure all of
petitioners' LHW Act risks. In the fiscal years ended
January 31, 1986, and January 30, 1987, Eagle received
approximately 29 percent and 41 percent, respectively, of its
premiums from unrelated insureds. The transactions among
Services Group and its subsidiaries and Eagle that were not
treated as insurance for tax purposes in 1985 through 1987 would
have been treated as insurance transactions in those years if the
transactions had been entered into with nonaffiliated parties.
Audit History
Services Group and its affiliates claimed deductions for
payments, directly or indirectly, to Hanseatic, Norwesco,
Executive, and Eagle as insurance premiums under section 162 in
the years paid. Services Group and its subsidiaries were audited
for each of its fiscal years ended January 31, 1977, through
January 25, 1987, except the fiscal year ended January 25, 1980.
As a result of the audits, respondent proposed to disallow
insurance premium deductions for payments made in those years
directly or indirectly to Hanseatic, Norwesco, Executive, and
Eagle.
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Last modified: May 25, 2011