Micro-Captive Insurer Deduction Denied by Tax Court

The U.S. Tax Court ruled against a construction company trying to write off consulting payments and premiums made to its micro-captive insurance company.

The insurance premiums can’t be deducted because the micro-captive didn’t provide insurance, the Tax Court said Wednesday, relying on previous rulings, including Avrahami v. Commissioner.

Bob and Rob Caylor owned Caylor Construction, a large construction business that had several entities, including Caylor Land, which it paid millions in yearly consulting fees. In 2007 it launched a micro-captive insurance company, Consolidated Inc., to handle insurance for the Caylor entities, which paid nearly 100& of their gross receipts ...