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Rachel Partain Speaks to Tax Notes on Microcaptives

February 25, 2020, Tax Notes

A microcaptive insurer argues that the Tax Court’s “fundamentally flawed” assessments led to an erroneous conclusion that the company’s transactions weren’t insurance for federal tax purposes.

. . .

The hope is that the Tenth Circuit at least provides guidance on some issues Reserve raises, particularly risk distribution, because most captive arrangements involve a risk-pooling mechanism, Rachel L. Partain of Caplin & Drysdale told Tax Notes.

A circuit court decision could help taxpayers considering whether to settle with the IRS or continue litigation as the IRS ramps up its enforcement, Partain said.

Reserve made good arguments attacking Avrahami, according to Partain. She said that’s important because the Tax Court continues to apply its risk distribution approach and reasoning in that case to others “with nothing more than just a citation.”

. . .

According to Partain, practitioners are concerned that the Tax Court has woven the sham transaction analysis “throughout the application of the insurance doctrines, which then potentially twisted” those assessments, rather than addressing the issue up front.

For the full article, please visit Tax Notes’ website (subscription required).


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