The IRS Offers Settlements for Owners of Micro-Captives Insurance Companies
By Anthony Diosdi Once upon a time, there was a type of insurance company known as a micro-captive insurance company. The use of micro-captive insurance companies were a very effective vehicle for transferring wealth out of an operating business so that wealth was not trapped and exposed to higher taxation by the IRS. By paying premiums to a micro-captive insurance company, wealth was effectively transferred out of the operating business and into the captive. The premiums of the policies were paid with pre-tax dollars by the business. Because micro-captive insurance companies had the benefit of being able to accrue reserves tax-free and other tax advantages available only to insurance companies, micro-captive insurance companies offered huge tax benefits. For example, Internal Revenue Code Section 831(b) permitted micro-captive insurance companies to claim…