Clougherty Packing Co. v. Commissioner

Jacobs, J, concurring: I concur in the result reached by the majority but not in the majority’s reasoning.

As the majority recognizes, a deduction for contributions to reserves for self-insurance is not allowable under section 162. What one may not do directly cannot be done circuitously. On the facts before us — a wholly owned subsidiary whose only business is that of insuring its ultimate parent — the circuitous attempt to side-step the prohibition against a deduction for self-insurance is obvious. To borrow from an old television comedy program, a rabbit wearing a sign that reads "chinchilla,” in a cage marked "chinchilla cage,” and eating food denoted as "chinchilla food,” is nevertheless a rabbit.

I do not. espouse the economic family theory (as apparently adopted by the majority) since to do so would deny a deduction for a premium paid under an otherwise valid insurance arrangement solely because of the relationship between the insured and the insurer. Nor do I subscribe to the position that, in every case in which the insured’s policy is the only policy issued by the insurance company, the lack of risk distribution, standing alone, is a sufficient ground for denying a deduction for the premium paid. My position is simply that where both the insurance company is ultimately wholly owned by the insured and the only policy issued by the insurance company is to its parent corporation, it defies logic to consider such an arrangement as anything other than self-insurance. What may be the outcome in another case presenting different facts must be left for another time.