Just a few years ago, captive insurance companies were a hot news item in the arcane world of abusive tax shelters. Sleazy promoters were signing up small businesses in droves. If you created a cell captive as a property and casualty loss management tool, it’s probably legitimate. If you “bought” an off the shelf captive from a promoter who promised tax savings, there is a good chance you own an abusive tax shelter.
After the initial wave of fraud and audits, many of the bad promoters went away. New reports suggest that captives are again making a comeback. And with the next generation of captives will come the inevitable fraudsters looking to catch a free ride on the resurgent popularity of these products.
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Captive Insurance and Other Abusive Tax Shelters
By Lance Wallach, CLU, CHFC Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness
PhoneCall Lance Wallach at (516) 938-5007
Captive insurance arrangements that are funded with cash-value life insurance are the hot tax shelter for 2014. But serious questions exist whether they work as the promoter’s promise they will do.
During the savings & loan crisis of the late 1980s and early 1990s, the courts used a particular acronym to describe cases where a physician had made an obviously bad investment in an oil & gas deal, and then sued to try to recoup their losses. Such a case was known as a "DDC", which was short for "Dumb Doctor Case".
Some doctors have a habit of getting into deals that don't make any sense. There's a saying that doctors will crawl on their bellies over broken glass for a mile to get to a bad deal, but they won't walk across the street to get to a good one.
Life insurance companies started pushing 412i plans and 419 welfare benefit plans in the 90s to business owners. When I spoke atopics, please contact the au
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Captive Insurance and Other Abusive Tax Shelters
By Lance Wallach, CLU, CHFC Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness
PhoneCall Lance Wallach at (516) 938-5007
Captive insurance arrangements that are funded with cash-value life insurance are the hot tax shelter for 2014. But serious questions exist whether they work as the promoter’s promise they will do.
During the savings & loan crisis of the late 1980s and early 1990s, the courts used a particular acronym to describe cases where a physician had made an obviously bad investment in an oil & gas deal, and then sued to try to recoup their losses. Such a case was known as a "DDC", which was short for "Dumb Doctor Case".
Some doctors have a habit of getting into deals that don't make any sense. There's a saying that doctors will crawl on their bellies over broken glass for a mile to get to a bad deal, but they won't walk across the street to get to a good one.
Life insurance companies started pushing 412i plans and 419 welfare benefit plans in the 90s to business owners. When I spoke at the annual national convention of the National Society of Actuary’s about the problems with 419 and 412i plans in 2002 the IRS invited me to address their high level people that were writing regulations on point. We discussed the problems with these plans. The IRS then came up with additional regulations and set up task forces to audit these plans. The results for the business owners and Doctors were audits and very large taxes. I warned in financial publications and at conventions that I spoke at about the upcoming problems. I told people to file under IRS 6707A properly to at least reduce IRS fines on audit. In 2002 I also wrote to life insurance companies like Hartford Life etc. What was the result? The insurance companies continued to push these abusive plans and the IRS audited them. As an expert witness against these insurance compantopics, please contact the au