Beveled Edge Insurance Company, Inc., et al., Docket No. 19821-16, filed 2/12/26, is lead petitioner in 14 (count ’em, 14) microcaptive deficiency cases. The owners of this corporate squadron want summary J that the micros, organized under the laws of KY, are separate entities for tax purposes. They cite Moline Props., 319 U.S. 436 (1943).

OK, says Judge James S. (“Big Jim”) Halpern, but that’s only half the question here. Corporations are separate entities when they satisfy the statutory minimum requirements to become an insurance company under its State of incorporation. That that is especially so when the corporation is not a wholly-owned subsidiary of the insured.

“… respondent does not dispute that [the Corps] were validly formed under Kentucky law. Respondent objects to the Motion on the grounds that there remain genuine disputes as to whether the three corporations satisfy the conditions for—and avoid the exceptions from—application of the general rule of Moline Properties (that separate entities will be respected for tax purposes). Respondent points out that petitioners exclusive list of material facts fails to address the business purposes or continuing business activities of the three corporations, nor does it aver facts to conclude that the corporate forms should not be disregarded because sham or unreal. See Moline Properties, 319 U.S. at 438-39.

“Respondent is correct. Petitioners have failed to address facts that are material if we are to rule that the [each of the Corps]’ respective status as separate state-law entities is to be disregarded for federal tax purposes. For that reason, we will deny the Motion.” Order, at p.6. (Footnote omitted).

Here’s the missing footnote: “In passing, we observe that we do not see the purpose of respondent’s objection that [two of the Corps] be considered separate entities for federal tax purposes. Respondent has determined deficiencies in each’s income tax for [year at issue], which determinations would seem in jeopardy if the entity status of the corporations were disregarded for federal tax purposes.” Order, at p. 6, footnote 5.

A corporation can be separate and have a separate deficiency, but if it is a sham the deficiency will rebound on the owners.