- 26 -
General neither created a capital asset nor required
amortization. Petitioners employ the contention that they did
not purchase insurance from Western General both in an effort to
avoid the dictates of the foregoing capitalization rules and as
the basis for their alternative argument that the payments to
Western General were fully deductible in the year paid.
Nevertheless, the record contradicts petitioners’ contention
that the arrangement with Western General did not constitute the
provision of insurance to them. In their petitions, petitioners
assert as a fact that they managed the risks associated with the
future obligations they assumed under the EWA’s “by obtaining
commercial insurance coverage therefor from an unrelated third-
party insurer, Western General Insurance Co.”. Because
petitioners did not dispute the nature of their arrangement with
Western General as constituting the purchase of insurance until
after submission of these cases fully stipulated, the record with
respect to this issue is not exhaustive. However, the available
evidence belies petitioners’ claim. First, petitioners have
stipulated that the amounts paid to Western General were for
insurance costs. Specifically, petitioners stipulated that “All
amounts paid to Western General during the years at issue by
* * * petitioners constitute qualified advance payment amounts.”
Rev. Proc. 92-98, 1992-2 C.B. at 513, to which reference is
repeatedly made in the stipulations, defines the term “qualified
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011