Doctor Owes $1.74 Million for Illegitimate Insurance Deductions

The founder of an eye surgery center and two research centers can’t deduct $1.74 million in premiums paid to microcaptive insurance companies he controlled, the US Tax Court ruled Tuesday.

Sunil Patel paid substantially more in premiums to microcaptives Magellan Insurance Co. and Plymouth Insurance Co. than to his commercial insurers, creating substantial tax benefits for himself and his wife, Laurie McAnally-Patel.

Judge Courtney D. Jones agreed with the IRS that Magellan’s and Plymouth’s purported captive transactions don’t constitute insurance because they failed to distribute the risk or act as an insurer commonly would. “In short, we find that Magellan’s ...