Doctor Liable for Tax Penalties for Denied Micro-Captive Program

A doctor is liable for tax penalties for using a micro-captive insurance program that was disallowed because it lacked economic substance, the US Tax Court said Wednesday in a precedential opinion.

The Tax Court sustained about $397,000 in accuracy-related penalties against Sunil Patel and Laurie McAnally-Patel, whose micro-captive insurance program was ineligible for tax deductions, the court determined last year. The IRS’s use of the economic substance doctrine, codified in IRC Section 7701(o), to determine that the $1.74 million they paid in premiums to micro-captive insurance companies they controlled for their 2013 to 2016 tax years were generated ...