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1, 1983, that summarized the purpose and content of the February
24 meeting at Briarcliff Manor. The memorandum states:
The purpose of this meeting was to consider Frank B.
Hall's proposal presented to * * * [petitioner] last
September 1982 which dealt with the feasibility of
creating a subsidiary insurance company. The subject
reviewed in the report dealt with declared value
insurance and the utilization of an insurance
subsidiary to handle customer risk of loss on property
in transit.
The topics discussed in our Thursday meeting focused
strictly on the declared value program and the
viability of converting this into an insured plan that
would produce, in the final analysis, an improved
economic result for * * * [petitioner]. The report
submitted by Hall dealt with the organization of a
United Parcel insurance subsidiary company. This new
insurance entity would assume reinsurance from a
licensed admitted US carrier who would underwrite the
declared value program.
During the February 24 meeting, petitioner's tax counsel,
Mr. Dougherty, expressed concern with the specifics of the Hall
proposal, and he believed that the proposal would not be viewed
favorably by the Internal Revenue Service (IRS). Mr. Dougherty
suggested an alternative whereby petitioner would form an
insurance company in Bermuda to be owned by petitioner's
employees and, in this manner, such a company would be classified
as a noncontrolled foreign corporation. Mr. Dougherty believed
that the Bermuda insurance company could accept reinsurance of a
licensed U.S. underwriter directly and not have U.S. tax
obligations on profits until risk funds were repatriated.
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