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Captive Insurance And The IRS Settlement Initiative In Perspective - IR-2019-157: Gift Season Came Early this Year for Taxpayers with Abusive Captive Insurance Arrangements



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The IRS's 831(b) settlement offer has been described as a ‘Christmas came early this year’ sweetheart deal for the taxpayers who have been lucky enough to receive it. The deal allows clients to cut their losses and get out of abusive risk-pooled 831(b) captive arrangements with a relatively minimum of pain. The offer is, however, full of complexities and nuances unique to captive insurance planning, and taxpayers who do accept this offer should utilize experienced counsel to assist them in the process.

The best way to understand this important development is to join nationally recognized captive experts Jay Adkisson and David Neufeld in their exclusive LISI webinar where they review all of the the benefits and pain points in this offer, including the following:

·      Whether a taxpayer lucky enough to be the recipient this offer should accept, and how they can accept;

·      How to treat the (now) non-deductible insurance payments as income to the captive;

·      How to handle the 10% of the deduction taken by the operating businesses for insurance payments to the captive;

·      For offshore captives, avoidance of substantial penalties if the § 953(d) election is invalidated;

·      The 40% non-disclosure of non-economic substance penalty, the 20% accuracy-related penalty and future legal tax-defense fees and expenses;

·      How to handle the give-up of the 90% of the deductions by the operating businesses for insurance payments to the captive, as well as any federal gift tax avoidance benefits of the captive arrangement;

·      How to treat the 10% accuracy-related penalty;

·      Dealing with the immediate liquidation of the captive and/or the making of a deemed qualified dividend, without being able to obtain credit for the insurance payments to the captive or any captive management fees paid to the promoter;

·      How to work out the federal gift tax consequences of accepting this offer (or not), draft the federal gift tax return that may be required by the terms of this offer, and make sure that the client has the funds available to pay these taxes if the lifetime credit will not be used or is unavailable because it has already been used up; and

·      Cooperating in providing information to the IRS and sitting for an interview by IRS personnel without the benefit of representation.


There will be no CE for this webinar


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Jay Adkisson is a partner of Riser Adkisson LLP with offices in Las Vegas and Newport Beach, and is admitted to practice in Arizona, California, Nevada, Oklahoma and Texas. Jay was the first Chair of the American Bar Association Business Law Section's Committee on Captive Insurance, and served as a Business Law Section Advisor to the drafting committees of the Uniform Voidable Transactions Act (adopted 2014) and the Uniform LLC Protected Series Act (adopted 2017). Jay currently serves as a Business Law Section Advisor to the Canada-U.S. Harmonization Project for the Uniform Foreign Enforcement of Judgments Act. With Chris Riser, Jay wrote the book "Asset Protection: Concepts & Strategies" (McGraw-Hill 2003). He also writes the Wealth Conservation column for Forbes.com, and has twice been an expert witness to the U.S. Senate Finance Committee. Jay.'s practice concentrates in the area of creditor-debtor law, both judgment enforcement and debtor defense, and bankruptcy. Jay has also twice been appointed a court receiver in post-judgment enforcement actions.


David S. Neufeld has practiced law for more than 30 years, advising individuals on sophisticated wealth planning (encompassing income tax, estate tax, state residency tax planning, asset protection, and the legal aspects of insurance and investment planning) and fiduciary due diligence. Additionally, he is an international tax lawyer who has helped business clients engaged in both inbound and outbound transactions as well as the individual tax issues that arise from cross-border business and transactions. He also advises insurance and wealth management institutions on programs, including “private placement life insurance” and captive insurance companies, that deliver to their clients cost-efficient risk mitigation along with tax-efficient investment opportunities. In addition, David is highly sought after to consult with taxpayers and their legal and accounting advisors on “aggressive tax planning gone bad,” including Form 8886 filings (and misfilings), resulting tax audits and tax litigation as well as an expert witness in the consequential civil litigation.

David is past chair of the Insurance & Financial Planning Committee of the Real Property, Trust & Estate (RPTE) Section of the American Bar Association among other leadership positions within the ABA. In 2006 David became Chairman of the Synergy Summit, a leadership organization whose members include the top leaders from within the ABA, AICPA, SFSP, NAELA and NAEPC, among others. In 2007 David was appointed ABA Advisor to the NCCUSL drafting committee for the “Uniform Insurable Interest in Trust” Law.

A pioneer in domestic and offshore limited liability company law, including chairing the “Single-Member LLC Task Force” for the New Jersey State Bar Association’s Tax Section and drafting the Caribbean island of Nevis’ LLC ordinance and its captive insurance amendments, Mr. Neufeld was one of four lawyers in the state to be awarded the New Jersey State Bar Association’s 1998 “Advocacy Award.” David is rated AV-Preeminent by Martindale-Hubble, its highest rating, has been designated an Accredited Estate Planner by the National Association of Estate Planners and Councils, has been repeatedly listed in New Jersey’s Top Rated Lawyers and Super Lawyers.

Having received his A.B. from Duke University, his J.D. cum laude from New York Law School and his LL.M. in Taxation from New York University School of Law, David served a two-year appointment as attorney-advisor to Judge Julian I. Jacobs of the United States Tax Court. He has been admitted to the Society of Trust & Estates Professionals (STEP), has been a member of the Board of Trustees of Prosperity New Jersey and was on the Editorial Advisory Board of the Asset Protection Journal. David has published scores of articles and has spoken around the world on the areas of his expertise, as well as having been featured in BusinessWeek, Medical Economics, The Wall Street Journal and appearing on CNBC, among others. One of David’s favorite hobbies outside the office is performing stand-up comedy.


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