Rev. Rul. 69-512

Structures erected, maintained, and operated by the taxpayer are constructed of very light wood and are situated in close proximity to other buildings of like flimsy construction. Fire is one of the greatest hazards in the taxpayer's business and constantly endangers, impairs, and threatens its business. The taxpayer was unable to obtain fire insurance on the properties and set aside in a reserve account a percentage of its income to cover losses by fire.

Held, the amounts set aside as a reserve to cover self-insurance are not ordinary and necessary expenses paid or incurred during the taxable year in carrying on its business and no deduction is allowable under section 162 of the Internal Revenue Code of 1954. See L. A. Thompson Scenic Railway Co. v. Commissioner, 9 B.T.A. 1203 (1928).

S.R. 2586, C.B. IV-1, 227 (1925), is hereby superseded, since the position stated therein is set forth under the current statute and regulations in this Revenue Ruling.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.