Suffice it to say that the Reserve Mechanical case attracted a lot of attention within the small captive insurance sector. Numerous state captive insu
Suffice it to say that the Reserve Mechanical case attracted a lot of attention within the small captive insurance sector. Numerous state captive insurance groups supported the captive insurance company in the appeal as amici curiae (albeit I found their brief to be very pedestrian, if not at points just plain awful, and the Tenth Circuit apparently didn't make much of it either). This support for the taxpayer in the case indicated that pretty much the very existence of the risk-pooled small captive insurance industry teetered on the outcome of this case: If the IRS lost and the captive won, perhaps microcaptive transactions could survive after all. If the captive lost and the IRS won, it was all over for risk-pooled small captives.
Sneaking a peek at the last chapter, the IRS wins in a blowout and the involved captive tax shelter gets its appeal poured out in all particulars. After this decision, risk-pooled small captives are no longer tenable, period. The final nail in the coffin of the legal viability of microcaptives has now been driven in, and hard.
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2 年“Abusive micro-captive insurance arrangements” are a key focus for enforcement, the IRS has said as it announced a recruitment drive for tax abuse attorneys.? The Internal Revenue Service said it would seek to “help the agency combat syndicated conservation easements, abusive micro-captive insurance arrangements and other tax schemes” with the hires. Up to 200 new staff will help the IRS manage the increasing caseload in its multi-year effort to stamp out abusive schemes and ensure those participating pay tax owed and penalties, it said. Positions will be available around the country and work across various areas, including handling cases in the United States Tax Court and serving on trial teams in the biggest cases. “This is an excellent opportuni
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2 年Small captives dead Published on June 7, 2022 Edit article View stats Status is online Lance Wallach -- 17 articles US insurer Reserve Mechanical has lost its appeal to a court case based on an announcement by the Internal Revenue Service that it is not a captive. The company appealed a tax court judgment affirming the decision of the Commissioner of Internal Revenue that it did not qualify for an exemption from income tax as a small insurance company and that the purported insurance premiums it received must therefore be taxed at a 30% rate under I.R.C. section 881(a). After review, the Tenth Circuit held that the record supported the tax court’s decision that the company was not engaged in the business of insurance. The court had two grounds for deciding that Reserve was not an insurance company: firstly Reserve had not adequately distributed risk among a large number of independent insureds; and secondly the policies issued by Reserve were not insurance in the commonly accepted sense. In addition, Reserve argued that if it was not an insurance company, the premiums it received should have been treated as nontaxable capital contributions. However, the Tenth Circuit also rejected that argument.