IRS News Release: Abusive Microcaptive Insurance Schemes to Be Vigorously Pursued (IRC §816)

Given a recent court decision upholding the IRS’s long-standing position regarding abusive microcaptive insurance transactions, taxpayers should be alert to these schemes, normally peddled by promoters, as they will ultimately cost them , the IRS announced. In Reserve Mechanical Corp. v. Commissioner, the Tenth Circuit upheld the IRS’s position on abusive microcaptive insurance transactions. After the Tax Court decided in favor of the IRS in numerous cases involving microcaptives, Reserve Mechanical is the first appellate decision recognizing the IRS’s position that these abusive transactions are shams, the IRS stated. Entering into such transactions will result in serious economic loss ...