A taxpayer doesn’t have to pay a penalty for inadequate disclosure because the IRS guidance requiring the disclosure isn’t legally binding, according to an IRS legal opinion made public Friday.
The unidentified taxpayer reported a micro-captive insurance transaction on only one of the two IRS forms they were supposed to use to make the disclosure, instead of on both. That could have subjected the taxpayer to a 40% penalty for disallowance of tax benefits as a result of a transaction lacking economic substance. (The IRS has warned that micro-captive transactions, which involve small insurers owned by the businesses they insure, ...
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