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IRS Micro-Captive Insurance Victory Affirmed by Tenth Circuit

May 13, 2022, 6:25 PM

The IRS won another battle against sham micro-captive insurance arrangements on Friday after an appeals court upheld a previous Tax Court ruling that found Reserve Mechanical Corp. didn’t qualify for an exemption available to small insurance companies.

The U.S. Court of Appeals for the Tenth Circuit affirmed the tax court’s view that Reserve Mechanical, “was not engaged in the business of insurance.” In this context, the company wasn’t entitled to an exemption and the purported insurance premiums it received must be taxed a rate of 30% under Internal Revenue Code section 881(a).

The IRS has paid close attention to ...

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