Deal Point: The purchaser in a transaction acquired a manufacturing company that started up an assembly line in the middle of September 2001 and claimed bonus depreciation. It is possible the asset was fully tested and capable of performing its intended function prior to September 10, 2001. The purchaser is concerned that if the assembly line was found to have been “placed in service” prior to such date, it will lose its ability to claim bonus depreciation, which would result in a significant underpayment of tax 2001 by the company.

Transactional Insurance Solution: The company purchased a Placed in Service Insurance policy which provides coverage for any tax, interest or penalties owed to the IRS in the even it is determined that the assembly line was placed in service prior to September 10, 2001.