Lance Wallach Life Insurance: Captive Insurance Buyer Beware
Is a captive insurance cell the way to go? - Accounting Today - Captive Insurance: Achieve large tax and cost reductions by renting a “CAPTIVE”. Most accountants and small business owners are unfamiliar with a great way to reduce taxes and expenses. By either creating or sharing “a captive insurance company”, substantial tax and cost savings will benefit the small business owner.
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The Avrahami case evinces the IRS's mode of attack on small captives that were primarily formed as tax shelters with only the barest lip-service being given to their risk financing function. If the IRS wins the case, it could have dramatic implications for smaller insurance companies that have made the 831(b) election and rely upon risk pooling arrangements to meet risk diversification.
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