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IRS provides second deal offer to microcaptive owners



The IRS said on Thursday that it would offer a new settlement offer to microcaptive owners who they claim violate tax rules through their misuse of alternative risk transfer vehicles. it will send settlement offers that are stricter than the offers it gave to about 200 owners last year. internal insurance transaction, "the IRS said.

Under the terms of the settlement," the IRS requires a substantial remission of the income tax benefits required by the taxpayer and penalties which may be partially mitigated if the taxpayer can show good faith, reasonable reliance on an independent, competent tax advisor and the taxpayer can show that it did not participate in any other reportable transactions, "

The new settlement offer will be limited to owners of microcapaptives, or 831

(b) prisoners, who have at least one open tax year under review. Owners with tax years issued in tax court will not be entitled, the statement said.

Prisoners who choose Section 831 (b) of the Internal Revenue Code are taxed only on their investment income, not on their insurance income. The premium limit for prisoners is $ 2.3 million.

The 831 (b) prisoners are often used by small and medium-sized enterprises that are too small to establish conventional prisoners, but many observers say they have also been used by wealthy individuals, their family members and others to create the appearance of insurance coverage at the same time. as they are used to avoid tax.

The IRS has won several important court decisions on microcaptive. The first was the so-called Avrahami case, which involved a jewelry company in Phoenix, which it won in 2017.

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