SDV Insights

Captive Owners Face the Music in Long-Awaited Tax Court Decision


The United States Tax Court recently made it harder for business owners to form captive insurance companies for the sole purpose of obtaining tax benefits.

In Benyamin Avrahami and Orna Avrahami v. Commissioner of Internal Revenue, the owners of a jewelry business formed a captive that collected exorbitant premiums, which the owners then attempted to write off as business expenses.  An investigation by the Tax Commissioner revealed that the owners maintained commercial insurance to cover realistic risk at a fraction of the premium that they paid to their captive to cover doubtful risk.  More critically, the Commissioner’s investigation revealed that the owners did not operate their captive as a real insurance company and that the captive did not adequately distribute risk.

In a 105-page decision, the Court agreed with the Commissioner’s findings on these points and would not allow the captive owners to deduct the large premium it paid to its captive as an ordinary and necessary business expense.

Click on this link to view the article in pdf format






CONTACT US


The email you are sending does not create an attorney-client relationship with SDV. We do not agree to representation until we have performed a check for conflicts of interest and expressly agree to provide services in a particular matter via an engagement letter. The information submitted to us via this website will NOT be treated as confidential or privileged as a lawyer/client communication and our receipt of this information does not prevent us from representing a client related to the subject of your inquiry.

Northeast

35 Nutmeg Drive
Trumbull, CT 06611

203.287.2100

233 Mount Airy Road
Basking Ridge, NJ 07920

973.446.7300

Southeast

999 Vanderbilt Beach Road, Ste 603
Naples, FL 34108

239.316.7244

West Coast

One BetterWorld Circle
Temecula, CA 92590

951.365.3145

SDV is headquartered in Connecticut, with regional offices in New Jersey, Florida, and California to better serve our clients. We are ready to answer your questions and are eager to assist you in developing solutions.