b'TAXBack to the Basics: Caylor Land and What is Insurance for US Tax PurposesThe US Tax Court released Caylor Land & Development, Inc. v. Commissioner 1in March 2021. While the case is targeted at a micro-captive insurance arrangement, it also serves as a refresher for what it takes for an arrangement to constitute insurance (as opposed to something else). To start the new year off on the right foot, we provide a brief overview for when an arrangement constitutes insurance for US federal income tax purposes then take a look at how the court in Caylor Land analyzed some applicable factors.What is Insurance?This question can be a tricky one, since the US federal tax law does not provide a definition for what constitutes insurance for US federal income tax purposes. In Helvering v. E. Le Gierse, 312 U.S. 351 (1941), the Supreme Court set forth four factors for distinguishing insurance from other arrangements, each described below.Insurance in its commonly accepted senseAn insurance arrangement is insurance in its commonly accepted sense, generally depending on whether the insuring entity is organized, operated and regulated as an insurance company, has adequate capitalization and receives reasonable arms length premiums, among other factors. 2For this factor, it is helpful if the insurance arrangement is priced and documented like a typical insurance contract.Insurance riskInsurance risk means a risk that arises as a result of a fortuitous event and relates to an economic loss, where if the fortuitous event giving rise to the risk comes to pass, the indemnification restores the insured in whole or in part. For 1 Caylor Land & Development, Inc. et. al. v. Commissioner, T.C.M. 2021-30 (March 10, 2021).2 See, e.g., Avrahami v. Commissioner, 149 T.C. 144 (2017). 150|Global Insurance Industry Year in Review 2021'