Policy Selection: Capstone Releases Third "Reserve Mechanical" Commentary

Capstone Associated Services Ltd. recently released its third commentary, "How the Tax Court Rewrote the Standards for Insurance Policy Selection," surrounding the small insurance company Tax Court case Reserve Mech. Corp. v. Commissioner, 2018 Tax Ct. Memo LEXIS 87, (T.C. June 18, 2018).

The Houston-based captive service provider previously released two commentaries on the matter. The first, provided on June 27, 2018, focuses on insurable risks and the second commentary, provided on July 9, 2018, focuses on policy pricing. In these pieces, Capstone raises questions about the Tax Court's decision and asserts that the court made a number of incorrect conclusions surrounding coverages, losses, and pricing.

In their third commentary, released on December 19, 2018, Capstone examines the issues involving insurance policy selection and related issues raised in the case. Here and elsewhere, Capstone says that while the Tax Court adopted the theme that Reserve Mechanical's insurance arrangement amounted to a tax shelter that lacked a legitimate business purpose, the government did not support this theme with witnesses or with documented evidence.

Throughout this commentary series, themed together as "Does Captive Insurance Exist after the Reserve Decision," Capstone thoroughly constructs its own position refuting the court's decision.