Precision Under Pressure: Insuring a Complex Tax Calculation

In a high-profile corporate separation, a buyer faced uncertainty around the accuracy of a large tax calculation stemming from a taxable spin-off.

…

The seller’s team had estimated approximately $250 million in taxes due on the spin-off, with the buyer inheriting responsibility for any underpayment or overpayment after closing. Castle Harbour was engaged to transfer this gain variance risk to insurers. Working alongside Big Four accounting advisors who had conducted extensive basis and valuation studies, the team presented a compelling case to underwriters that the tax had been calculated correctly. A bespoke tax insurance policy was negotiated to cover any variance between the estimated tax and the actual amount ultimately owed. This solution gave the buyer comfort that an unexpected shortfall in the tax calculation would be indemnified, allowing the deal to close with certainty and no lingering exposure.

Policy type: Tax Insurance (Contingent Tax Risk)
Size: $1B+
Sector: Hospitality