May 31, 2018
Published in Tax Notes
May 31, 2018
May 31, 2018
By Emily L. Foster
The IRS could resolve captive insurance transaction disputes with a global settlement, as it did for abusive transactions in the 2000s, but tax professionals say the trick is to root out the bad actors.
Microcaptive insurance cases are seeing high volume in three areas — examination, appeals, and litigation — and could be ripe for a global settlement initiative, according to several tax professionals. Their estimates range from hundreds of outstanding cases involving captive insurers — companies wholly owned and controlled by their insureds — to potentially thousands of them. The IRS had no immediate comment on how many cases it is dealing with.
But the tax professionals warned that the solution won’t be as simple as offering settlement programs to captive insurance abusers, because the agency’s first and largest hurdle is determining which operations are legitimate and which are misusing the tax code.
Global settlement […]
While there are many reasons for people to invest in any given financial platform, the attraction of investing in cryptocurrency has long been rooted in the platform’s anonymity, lack of oversight, and inherent decentralization. As such, many investors, relying on the anonymous and unregulated nature of cryptocurrency, have not reported their earnings to the IRS and have avoided disclosure without consequence. However, recent indicators from prominent tax practitioners, the IRS, and the Department of Justice are hinting at the demise of the days of abject anonymity in the crypto-world.
At a recent May 12th tax conference, a specific panel called “Life Cycle and Tax Implications of a Cryptocurrency” discussed ways in which the tax landscape is changing for cryptocurrency investors. Two major themes emerged from the panel—the Internal Revenue Service (IRS) is stepping up their enforcement capabilities, and the Department of Justice (DOJ) is primed to prosecute cryptocurrency crimes.
First, the IRS […]
As the tax season winds to a close, tax practitioners and taxpayers can once again begin the process of looking ahead. However, this tax filing season has left several questions unanswered. In particular, the treatment of certain cryptocurrency transactions have left taxpayers searching for answers without a clear path forward.
Generally, the basic tax treatment of cryptocurrency has been addressed. In Notice 2014-21, the IRS alerted taxpayers that cryptocurrency will be subject to the same laws surrounding other forms of property. Although this concept seems straightforward, the nature of cryptocurrency has already lead to several substantial complications. For instance, simply determining the value of a cryptocurrency at any given moment may depend greatly on the exchange you are looking at and, given the volatility of the market, the time of day.
Compounding these issues is the general lack of public understanding surrounding the taxability of cryptocurrency. In US v. Coinbase Inc., the […]
On March 23, the President signed into law H.R. 1625. This legislation, also known as the “Consolidated Appropriations Act, 2018,” provides appropriations for the Federal Government through Sept. 30, 2018. However, H.R. 1625 also retroactively amends IRC § 831(b), by making changes to the diversification requirements imposed by the PATH Act of 2015.
The Path Act, in addition to increasing the limitation on premiums under 831(b), also required taxpayers to pass one of two tests. For ease, we will call these: 1) the 20 Percent Test or 2) the Ownership Test. However, questions arose regarding both of these tests – thus resulting in changes under H.R. 1625.
The 20 Percent Test
Under the 20 Percent Test, no more than 20 percent of the annual net written premiums of the captive insurance company can be attributable to one policyholder. For purposes of this test, brother/sister corporations are considered to be one policyholder.
Questions arose […]
On March 19, the Serviced announced 2018’s “Dirty Dozen.” This list, compiled annually, warns taxpayers to stay alert and avoid items that the IRS refers to as “common scams.” Micro-captives, included in the Dirty Dozen under IR-2018-62, appear on this list for the fourth consecutive year. The 2018 Dirty Dozen also includes: frivolous tax arguments, falsified income, falsely padding deductions and returns, improper claims for business credits, falsely inflated returns, identity theft, phone scams, phishing, fake charities, and return preparer fraud.
Although an important, and legally recognized, tool for managing the insurable risks of businesses, the tax laws surrounding micro-captives leave them susceptible for abuse. This reality has fueled the Service’s apprehension of micro-captive arrangements. Since their first appearance on the Dirty Dozen in 2015, 831(b) captives have faced ever increasing scrutiny. Since then, a high profile ruling regarding 831(b) captives has been issued in Avrahami v. Commissioner, and micro-captives have […]
Beginning last year, the IRS has been looking at transactions involving cryptocurrency with an increased scrutiny. Taxpayers buying, selling, mining, or exchanging cryptocurrency should be aware of the interest the IRS has shown in the area, and the possible consequences for failing to report taxable gain stemming from its use.
The IRS investigation into cryptocurrency abuses began when a John Doe Summons was issued to Coinbase Inc. This summons required Coinbase to turn over large amounts of personal data on any user making a transaction with cryptocurrency between Jan. 1, 2013 and Dec. 31, 2015. Coinbase, the nation’s largest Bitcoin exchange, refused to submit to the summons. On March 16, 2017, Coinbase filed a petition in the Federal District Court for the Northern District of California to have the summons thrown out.
The IRS argued in support of their summons that the number of taxpayers reporting Bitcoin related items on electronically filed […]
John Dies, Managing Director of Tax Controversy at Alliantgroup LP, interviewed by Captive Insurance Times in regards to captive insurance and winning a case against the IRS.
March 14, 2018
Published in Captive Insurance Times
March 14, 2018
By Ned Holmes
Published in captive insurance times
For a good captive, standing up to the Internal Revenue Service (IRS) may be the right answer and could positive for the industry as a whole, says John Dies, managing director of tax controversy at alliantgroup.
Speaking at Captive Insurance Companies Association’s (CICA) 2018 Conference, Dies suggested the impact of winning a case against the IRS could be felt across the captive industry.
He said: “It is great for the industry when a captive stands up to the IRS, wins and creates a precedent that the industry can use.”
“We have seen the impact in cases where outsiders thought there was not a chance a captive could win and they made changes in the industry–and I believe that is positive for the industry.”
According to Dies, in the right context fighting the case is the correct move for a captive.
He explained: “In many cases, great […]
Robert Russell, Former Counsel to the Joint Committee on Taxation and U.S. Department of Treasury; alliantgroup Director of International Tax Controversy, Planning and Policy, quoted in Tax Notes.
March 9, 2018
Published in Tax Notes