IRS Scores Another Court Win in Microcaptive Insurance Crackdown

An Oklahoma couple became the latest on Monday to fall short in their challenge to the IRS’s enforcement against abusive microcaptive insurance arrangements.

The IRS didn’t allow John and Andrea Sheperd, through their business Sheperd Royalty LLC, to claim a $1.1 million business expense deduction for “insurance premiums” paid in 2012 because the agency said those premiums, paid to a second Sheperd-owned business, didn’t constitute “insurance” for federal tax purposes.

The US Tax Court agreed that the Sheperd’s second business, Royalty Management Insurance Co., didn’t provide Sheperd Royalty the benefits of a typical insurance arrangement, meaning it shouldn’t provide the ...