How the IRS is Sharpening its Focus on “Microcaptive” Insurance Arrangements

The Internal Revenue Service is sharpening its focus on “microcaptive” insurance arrangements—and four recent cases demonstrate how the agency is attacking 831(b) structures.

From challenges to whether these arrangements constitute true insurance to the application of the codified economic substance doctrine, Ellen Brody and Jacob Entin write about how the government is signaling a sustained enforcement push. Add in reportable and listed transaction designations, steep penalties under §§ 6707A and 6662A, and an unlimited statute of limitations for undisclosed listed transactions, and the compliance stakes have never been higher.

They discuss whether these arrangements constitute true insurance to the application of the codified economic substance doctrine. Add in reportable and listed transaction designations, steep penalties under §§ 6707A and 6662A, and an unlimited statute of limitations for undisclosed listed transactions, and the compliance stakes have never been higher.

Read more in the latest issue of the New York State Society of CPAs “Tax Stringer.”