We assist prospective,or existing captive owners and their advisors in evaluating, designing, and implementing captive solutions. We also review existing captive structures and suggest ways that they can be used more efficiently. In addition we also have relationships with experienced and reputable insurance managers, actuaries, underwriters, and accountants who specialize in captive insurance arrangements. Our ex IRS agent CPAs will properly file under 6707A to reduce takes on audit.
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Captive Insurance
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How much life insurance do you actually need
Every once in a while we get a call on our Financial Helpline from someone whose financial adviser recommended that they invest in a permanent life insurance policy (including whole, universal, or variable universal life). The adviser’s pitch can sound compelling. Why purchase temporary term life insurance that you’ll likely never use? Isn’t that like throwing money away? With permanent life insurance, part of your premiums are invested and some of it can be borrowed tax-free for retirement, or your children’s college education, or anything else you’d like and your heirs will get a nice death benefit when you pass away.
But is it really always as great as it sounds? If you listen to financial “gurus” like Suze Orman and Dave Ramsey, you’re likely to come away thinking that the only person who benefits is the insurance salesmen who reaps a big commission. As with many controversies, the truth is somewhere in between. Whether it makes sense in your particular situation, depends on several factors:
1) How much life insurance do you actually need?
This is important for a couple of reasons. First, you want to make sure you purchase as much as you need. If a more expensive permanent policy means you can only afford to buy less, it’s probably not a good idea. After all, the whole point of insurance is to make sure your family has enough to be taken care of financially if something were to happen to you.
Likewise, you don’t want to be buying insurance that you don’t need either. That’s because on average, you’re likely to spend more on it than you or your family will ever receive. Think about it for a moment. The insurance company has to collect enough in premiums not only to pay out benefits but also to cover their expenses (including that nice big fat commission check your adviser could get for selling it to you) and make a profit. In fancy business lingo, your expected return on those premium dollars is negative.
2) How long will you need the insurance?
One of the main reasons that permanent insurance is so much more expensive is that it’s meant to cover you for your entire life (hence “permanent” insurance) while cheaper term policies tend to cover you when you’re younger and least likely to use it. However, most people don’t need much or even any life insurance once they retire. Either they don’t have any dependents (hopefully the “kids” will have moved out of the basement by that point) or their dependent (usually a spouse) will usually have enough income to live on from Social Security, their assets (included those they inherited from the person who passed away) and any pension survivor benefits they’ll receive.
So who needs life insurance in retirement? They generally fall into three categories. The first is someone who doesn’t have enough assets to cover their final expenses (like funeral costs) and wants a small policy to cover these expenses so they don’t burden their family.
The second is someone who has a dependent that won’t have enough income to live on after they pass away. For example, some people decide to choose a higher “life only” payout on their pension, which leaves nothing to their spouse after they pass away, and then use the extra pension income to pay for a life insurance policy instead. This is called “pension maximization” and can be beneficial if the person is in really good health and can get a relatively low cost policy.
The final scenario is someone who has a taxable estate (currently one worth over $5 million) and wants to use a life insurance policy to pay the estate tax. This is particularly useful if they don’t want their heirs to have to make taxable retirement account withdrawals or sell a business or a piece of real estate in order to make those tax payments. Needless to say, this is a very small percentage of the population.
I have a lot of insurance and have made a great return but I am in the business.
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Lance Wallach
Plainview, NY 11803
Ph.: (516)938-5007
Fax: (516)938-6330 www.vebaplan.com
National Society of Accountants Speaker of The Year
----------------------------------------------------------------------------------------------------------------Plainview, NY 11803
Ph.: (516)938-5007
Fax: (516)938-6330 www.vebaplan.com
National Society of Accountants Speaker of The Year
The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
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Regulatory framework
2. Entity Classification for Federal Tax Purposes
Sections 301.7701-1 through 301.7701-4 of the Procedure and Administration Regulations provide the framework for determining an organization’s entity classification for Federal tax purposes. Classification of an organization depends on whether the organization is treated as: (i) a separate entity under §301.7701-1, (ii) a “business entity” within the meaning of §301.7701-2(a) or a trust under §301.7701-4, and (iii) an “eligible entity” under §301.7701-3.
Section 301.7701-1(a)(1) provides that the determination of whether an entity is separate from its owners for Federal tax purposes is a matter of Federal tax law and does not depend on whether the organization is recognized as an entity under local law. Section 301.7701-1(a)(2) provides that a joint venture or other contractual arrangement may create a separate entity for Federal tax purposes if the participants carry on a trade, business, financial operation, or venture and divide the profits therefrom. However, a joint undertaking merely to share expenses does not create a separate entity for Federal tax purposes, nor does mere co-ownership of property where activities are limited to keeping property maintained, in repair, and rented or leased. Id.
Section 301.7701-1(b) provides that the tax classification of an organization recognized as a separate entity for tax purposes generally is determined under §§301.7701-2, 301.7701-3, and 301.7701-4. Thus, for example, an organization recognized as an entity that does not have associates or an objective to carry on a business may be classified as a trust under §301.7701-4.
Section 301.7701-2(a) provides that a business entity is any entity recognized for Federal tax purposes (including an entity with a single owner that may be disregarded as an entity separate from its owner under §301.7701-3) that is not properly classified as a trust or otherwise subject to special treatment under the Internal Revenue Code (Code). A business entity with two or more members is classified for Federal tax purposes as a corporation or a partnership. See §301.7701-2(a). A business entity with one owner is classified as a corporation or is disregarded. See §301.7701-2(a). If the entity is disregarded, its activities are treated in the same manner as a sole proprietorship, branch, or division of the owner. However, §301.7701-2(c)(2)(iv) and (v) provides for an otherwise disregarded entity to be treated as a corporation for certain Federal employment tax and excise tax purposes.
Section 301.7701-3(a) generally provides that an eligible entity, which is a business entity that is not a corporation under §301.7701-2(b), may elect its classification for Federal tax purposes.
The threshold question for determining the tax classification of a series of a series LLC or a cell of a cell company is whether an individual series or cell should be considered an entity for Federal tax purposes. The determination of whether an organization is an entity separate from its owners for Federal tax purposes is a matter of Federal tax law and does not depend on whether the organization is recognized as an entity under local law. Section 301.7701-1(a)(1). In Moline Properties, Inc. v. Commissioner, 319 U.S. 436 (1943), the Supreme Court noted that, so long as a corporation was formed for a purpose that is the equivalent of business activity or the corporation actually carries on a business, the corporation remains a taxable entity separate from its shareholders. Although entities that are recognized under local law generally are also recognized for Federal tax purposes, a state law entity may be disregarded if it lacks business purpose or any business activity other than tax avoidance. See Bertoli v. Commissioner, 103 T.C. 501 (1994); Aldon Homes, Inc. v. Commissioner, 33 T.C. 582 (1959).
The Supreme Court in Commissioner v. Culbertson, 337 U.S. 733 (1949), and Commissioner v. Tower, 327 U.S. 280 (1946), set forth the basic standard for determining whether a partnership will be respected for Federal tax purposes. In general, a partnership will be respected if, considering all the facts, the parties in good faith and acting with a business purpose intended to join together to conduct an enterprise and share in its profits and losses. This determination is made considering not only the stated intent of the parties, but also the terms of their agreement and their conduct. Madison Gas & Elec. Co. v. Commissioner, 633 F.2d 512, 514 (7th Cir. 1980); Luna v. Commissioner, 42 T.C. 1067, 1077-78 (1964).
Conversely, under certain circumstances, arrangements that are not recognized as entities under state law may be treated as separate entities for Federal tax purposes. Section 301.7701-1(a)(2). For example, courts have found entities for tax purposes in some co-ownership situations where the co-owners agree to restrict their ability to sell, lease or encumber their interests, waive their rights to partition property, or allow certain management decisions to be made other than by unanimous agreement among co-owners. Bergford v. Commissioner, 12 F.3d 166 (9th Cir. 1993); Bussing v. Commissioner, 89 T.C. 1050 (1987); Alhouse v. Commissioner, T.C. Memo. 1991-652. However, the Internal Revenue Service (IRS) has ruled that a co-ownership does not rise to the level of an entity for Federal tax purposes if the owner employs an agent whose activities are limited to collecting rents, paying property taxes, insurance premiums, repair and maintenance expenses, and providing tenants with customary services. Rev. Rul. 75-374, 1975-2 C.B. 261. See also Rev. Rul. 79-77, 1979-1 C.B. 448, (see §601.601(d)(2)(ii)(b).
Rev. Proc. 2002-22, 2002-1 C.B. 733, (see §601.601(d)(2)(ii)(b)), specifies the conditions under which the IRS will consider a request for a private letter ruling that an undivided fractional interest in rental real property is not an interest in a business entity under §301.7701-2(a). A number of factors must be present to obtain a ruling under the revenue procedure, including a limit on the number of co-owners, a requirement that the co-owners not treat the co-ownership as an entity (that is, that the co-ownership may not file a partnership or corporate tax return, conduct business under a common name, execute an agreement identifying any or all of the co-owners as partners, shareholders, or members of a business entity, or otherwise hold itself out as a partnership or other form of business entity), and a requirement that certain rights with respect to the property (including the power to make certain management decisions) must be retained by co-owners. The revenue procedure provides that an organization that is an entity for state law purposes may not be characterized as a co-ownership under the guidance in the revenue procedure.
The courts and the IRS have addressed the Federal tax classification of investment trusts with assets divided among a number of series. In National Securities Series-Industrial Stocks Series v. Commissioner, 13 T.C. 884 (1949), acq., 1950-1 C.B. 4, several series that differed only in the nature of their assets were created within a statutory open-end investment trust. Each series regularly issued certificates representing shares in the property held in trust and regularly redeemed the certificates solely from the assets and earnings of the individual series. The Tax Court stated that each series of the trust was taxable as a separate regulated investment company. See also Rev. Rul. 55-416, 1955-1 C.B. 416, (see §601.601(d)(2)(ii)(b)). But see Union Trusteed Funds v. Commissioner, 8 T.C. 1133 (1947), (series funds organized by a state law corporation could not be treated as if each fund were a separate corporation).
In 1986, Congress added section 851(g) to the Code. Section 851(g) contains a special rule for series funds and provides that, in the case of a regulated investment company (within the meaning of section 851(a)) with more than one fund, each fund generally is treated as a separate corporation. For these purposes, a fund is a segregated portfolio of assets the beneficial interests in which are owned by holders of interests in the regulated investment company that are preferred over other classes or series with respect to these assets.
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The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
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The IRS audits are both targeted and coordinated
The IRS audits are both targeted and coordinated
Question: Are the IRS audits coordinated?
Question: Are the IRS audits coordinated?
Answer: Yes. The IRS audits are both targeted and coordinated. They are targeted meaning that the IRS obtains a list of the participating employers in a plan promotion and audits the participating employers (and owners) for the purpose of challenging the deductions taken with respect to the plan. The audits are coordinated meaning that there is an IRS Issue Management Team for each promotion that has responsibility for both managing the promoter audit(s) and also developing the coordinated position to be followed by the Examination Agents. Their intention is that all taxpayers under audit will receive the similar treatment in Exam. There are also IRS Offices that specialize in 419 audits. For example, IRS offices in upstate New York and in El Monte California will manage many audits of specific promotions. Williams Coulson has significant experience in working with both of these offices.
Question: What is the general IRS position on these plans?
Answer: Though there can be some differences among plans, the basic IRS position is that the plans are not welfare benefit plans, but really plans of deferred compensation. As such, the contributions remain deductible at the business level but are included in the owner’s 1040 income for every open year and the value of the insurance policy with respect to contributions in closed years is included in the owner’s income either in the first open year or the year of termination or transfer. The IRS will normally apply 20% penalties on the tax applied and 30% with respect to non-reporting cases (see discussion below).
Question: Can the penalties ever be waived?
Answer: Yes. The penalties can often be waived upon a showing of the taxpayer’s due diligence and good faith reasonable cause. For example, if the taxpayer can show reliance on an outside tax advisor who reviewed the plan and the law, the Examining Agent normally has the authority to waive the 20% negligence penalty. Note that there are different standards for waiving penalties among the IRS Offices. It is important to know the standards of each office before requesting a waiver.
Question: What if there is an opinion letter issued on the plan – will that eliminate penalties?
Answer: Generally, the answer is a resounding – No. If the opinion letter was issued to the promoter or the promotion itself and a copy was merely provided to the taxpayer (even if the taxpayer paid for it), the IRS perceives the advice to be bias and not reasonable for reliance.
Question: What if the taxpayer relied upon the advisor who sold the promotion?
Answer: The IRS also discounts any advice provided by parties who are part of the sales team for the promotion. It is possible to negate the bias against professionals involved in the sale if you can demonstrate that the professional was first a tax advisor and gave advice in that role and not as a salesman.
Question: What are the “listed transaction” penalties?
Answer: The IRS has identified certain multiple and single employer welfare benefit plans as listed transactions. Taxpayers who participate in listed transactions have an obligation to notify the IRS of their participation on IRS Form 8886. The Form 8886 must be filed with every tax return where a tax effect of the transaction appears on the return and for the first year of filing must also be filed with the IRS Office of Tax Shelter Analysis (OTSA). There are penalties that apply for the failure to file the Form 8886. The IRS position appears to be that although only the C corporation must file the 8886, if the business is a pass-through entity like an S Corporation, LLC or partnership, then the Form 8886 must be filed at both the entity level and also the individual level. The penalty for non-filing is 75% of the tax reduction for the tax year. Note that it is very clear that a plan does not have to be proven to be defective or abusive for the penalty to apply. Further, the IRS has made it very clear that they will construe the duty to disclose broadly. Thus, if there is even a possibility that a plan is a listed transaction, the taxpayer should consider strongly filing the Form 8886.
Question: Are there other negatives to not filing the Form 8886?
Answer: Yes. In addition to the non-reporting penalty, the negligence penalty discussed above of 20% becomes 30% and is much more difficult to have waived. Further, the non-reporting penalty cannot be appealed to tax court. Therefore, the only recourse is to pay the penalty, file for a refund and fight the case in District Court.
Question: Whose responsibility is it to notify taxpayers of the need to file Form 8886?
Answer: It depends. Many promoters take the initiative to inform their customers that the promotion may be considered to be a listed transaction and that they should consider filing Forms 8886, though some promoters have actually taken the opposite view and have directed customers to not file the Form 8886 to keep them off the IRS radar. These promoters face potential liability if the penalties are assessed. Because the Form 8886 is filed with the tax returns, it may be partly the responsibility of the CPA who prepares the returns to file the Form, though many CPAs may not know that the transaction is a listed transaction or how to prepare the Form. From the IRS perspective, the responsibility is clear – it is the taxpayer who bears the ultimate responsibility and will be penalized if the Form is not filed.
Question: Are some plans better than others?
Answer: Yes. Even though the IRS appears to have thrown a giant net over the entire industry, I have observed that many promoters have worked hard to develop a plan that complies with the tax law. The plans are supported by substantial legal and actuarial authority and make it clear that they are welfare plans and not deferred compensation plans. These plans are often very strong in their marketing materials as to the nature of the plan and also provide for less deductible amounts. On the other hand, some promotions have ignored new IRS Regulations (issued in 2003) and continue to sell and market plans that have been out of compliance for years. They make no attempt to bring their plans into compliance and seek to stay under the radar by directing their customers to not file Forms 8886.
Question: Do taxpayers have causes of action?
Answer: Maybe. We see two potential causes of action. First, in cases where the promoter has either created a defective product, or has turned a blind eye towards law changes, the promoter and potentially the insurance companies may have liability for the creating, marketing, endorsing and selling a defective product. Second, where planners have sold the product to customers improperly, by describing the plan as a safe, IRS approved retirement plan with unlimited deductions, they may have liability for fraudulent sales.
I do not agree with everything in this well written sales pitch. As an expert witness Lance Wallach’s side has never lost a case. I only know of two people that have successfully filed under IRS 8886, after the fact. Many of the hundreds of phone calls that I receive each year involve misfiling of 8886 forms.
If you are, or were in an abusive tax shelter like a 419 or 412i plan to time to act is now. If you are in a captive insurance or section 79 plan you should speak with someone that does not sell them. Many former promoters of abusive 419 plans now sell captive insurance or section 79 plans. IRS audits those plans. Who should you believe as many people still promote these scams?
Google Lance Wallach and the man pushing the plan.
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Reportable Transactions: IRS Audits 419, 412i, Captive Insurance Plans
Reportable Transactions .com: IRS Audits 419, 412i, Captive Insurance Plans With...:
By Lance Wallach
June 2011 The IRS started audit
By Lance Wallach
June 2011 The IRS started audit
419 412i captive insurance section 79 scams IRS ... - Goodreads
www.goodreads.com/.../1567545-419-412i-captive-insurance...
419 412i captive insurance section 79 scams IRS audits lawsuits. Comments .... in accordance with federal laws which require the disclosure of foreign accounts and certain abusive tax avoidance transactions. ... google lance wallach for more.Goodreads
Lawyer IRS Audits ,FBAR<OVDI,419,412i,captive Ins.,section 79 ...
www.lawyer4audits.com/
Tax Laws; Providing Guidance for. Businesses, Attorneys, CPAs & Insurance professionals ... "Our expert witness, Lance Wallach has never lost a case!" ...Reportable Transactions &419 Plans Litigation
financialchfc.blogspot.com/
Bryan Cave Llp (National Law Firm That Provided Generic Tax Opinion Letters) ... As an expert witness Lance Wallach's side has never lost a case. ... Business Owners in 419, 412i, Section 79 and Captive Insurance Plans Will Probably Be ...Tax Shelter Penalty Cases Hurt Thousands of Small Business Owners
kmjradiolance3.blogspot.com/2012/.../tax-shelter-penalty-cases-hurt.htm...
Jul 1, 2012 - If you are, or were in a 412i, 419, captive insurance or section 79 plan ... Lance Wallach, National Society of Accountants Speaker of the Year ... We asked ↧
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Using Captive Insurance Companies for Savings
February 10th
Financial Planning
Small companies have been copying a method to control insurance costs and reduce taxes that used to be the domain of large businesses: setting up their own insurance companies to provide coverage when they think that outside insurers are charging too much.
Often, they are starting what is called a “captive insurance company” – an insurer founded to write coverage for the company, companies or founders.
Here’s how captive insurers work.
The parent business (your company) creates a captive so that it has a self-funded option for buying insurance, whereby the parent provides the reserves to back the policies. The captive then either retains that risk or pays reinsures to take it. The price for coverage is set by the parent business; reinsurance costs, if any, are a factor.
In the event of a loss, the business pays claims from its captive, or the reinsurer pays the captive.
Captives are overseen by corporate boards and, to keep costs low, are often based in places where there is favorable tax treatment and less onerous regulation – such as Bermuda and the Cayman Islands, or U.S states like Vermont and South Carolina.
Captives have become very popular risk financing tools that provide maximum flexibility to any risk financing program. And the additional possibility of adding several types of employee benefits is of further strategic value to the owners of captives.
While the employee benefit aspects have not emerged as quickly as had been predicted, there is little doubt that widespread use of captives for employee benefits is just a matter of time. While coverages like long term disability and term life insurance typically require Department of Labor approval, other benefit-related coverages such as medical stop loss can utilize a captive without the department’s approval. Additionally, some midsized corporate owners also view a captive as an integral part of their asset protection and wealth accumulation plans. The opportunities offered by a captive play a critical role in the strategic planning of many corporations.
A captive insurance company would be an insurance subsidiary that is owned by its parent business (es). There are now nearly 5,000 captive insurers worldwide. Over 80 percent of Fortune 500 Companies take advantage of some sort of captive insurance company arrangement. Now small companies can also.
By sharing a large captive, participants are insured under group policies, which provide for insurance coverage that recognizes superior claims experience in the form of experience-rated refunds of premiums, and other profit-sharing options made available to the insured.
A true captive insurance arrangement is where a parent company or some companies in the same economic family (related parties), pay a subsidiary or another member of the family, established as a licensed type of insurance company, premiums that cover the parent company.
In theory, underwriting profits from the subsidiary are retained by the parent. Single-parent captives allow an organization to cover any risk they wish to fund, and generally eliminate the commission-price component from the premiums. Jurisdictions in the U.S. and in certain parts of the world have adopted a series of laws and regulations that allow small non-life companies, taxed under IRC Section 831(b), or as 831(b) companies.
Try Sharing
There are a number of significant advantages that may be obtained through sharing a large captive with other companies. The most important is that you can significantly decrease the cost of insurance through this arrangement.
The second advantage is that sharing a captive does not require any capital commitment and has very low policy fees. The policy application process is similar to that of any commercial insurance company, is relatively straightforward, and aside from an independent actuarial and underwriting review, bears no additional charges.
By sharing a captive, you only pay a pro rata fee to cover all general and administrative expenses. The cost for administration is very low per insured (historically under 60 basis points annually). By sharing a large captive, loans to its insureds (your company) can be legally made. So you can make a tax deductible contribution, and then take back money tax free. Sharing a large captive requires little or no maintenance by the insured and can be implemented in a fraction of the time required for stand alone captives.
If done correctly, sharing a large captive can yield a small company significant tax and cost savings.
If done incorrectly, the results can be disastrous.
Buyer Beware
Stand alone captives are also likely to draw IRS attention. Another advantage of sharing a captive is that IRS problems are less likely if that path is followed, and they can be entirely eliminated as even a possibility by following the technique of renting a captive, which would involve no ownership interest in the captive on the part of the insured. (your company).
Lance Wallach speaks and writes extensively about retirement plans, estate planning and tax reduction strategies. Reach him at (516) 938-5007 or www.vebaplan.com.
The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
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A warning for 419, 412i, Sec.79 and captive insurance
October 25, 2010
By: Lance Wallach
Taxpayers who previously adopted 419, 412i, captive insurance or Section 79 plans are in big trouble.
In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax deductible dollars to shareholders and classified these arrangements as "listed transactions."
These plans were sold by insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions. In general, taxpayers who engage in a "listed transaction" must report such transaction to the IRS on Form 8886 every year that they "participate" in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate. Section 6707A of the Code imposes severe penalties
($200,000 for a business and $100,000 for an individual) for failure to file Form 8886 with respect to a listed transaction.
But you are also in trouble if you file incorrectly.
I have received numerous phone calls from business owners who filed and still got fined. Not only do you have to file Form 8886, but it has to be prepared correctly. I only know of two people in the United States who have filed these forms properly for clients. They tell me that was after hundreds of hours of research and over fifty phones calls to various IRS personnel.
The filing instructions for Form 8886 presume a timely filing. Most people file late and follow the directions for currently preparing the forms. Then the IRS fines the business owner. The tax court does not have jurisdiction to abate or lower such penalties imposed by the IRS. Many business owners adopted 412i, 419, captive insurance and Section 79 plans based upon representations provided by insurance professionals that the plans were legitimate
plans and were not informed that they were engaging in a listed transaction. Upon audit, these taxpayers were shocked when the IRS asserted penalties under Section 6707A of the Code in the hundreds of thousands of dollars. Numerous complaints from these taxpayers caused Congress to impose a moratorium on assessment of Section 6707A penalties.
The moratorium on IRS fines expired on June 1, 2010. The IRS immediately started sending out notices proposing the imposition of Section 6707A penalties along with requests for lengthy extensions of the Statute of Limitations for the purpose of assessing tax. Many of these taxpayers stopped taking deductions for contributions to these plans years ago, and are confused and upset by the IRS's inquiry, especially when the taxpayer had previously
reached a monetary settlement with the IRS regarding its deductions. Logic and common sense dictate that a penalty should not apply if the taxpayer no longer benefits from the arrangement.
Treas. Reg. Sec. 1.6011-4(c)(3)(i) provides that a taxpayer has participated in a listed transaction if the taxpayer's tax return reflects tax consequences or a tax strategy described in the published guidance identifying the transaction as a listed transaction or a transaction that is the same or substantially similar to a listed transaction. Clearly, the primary benefit in the participation of these plans is the large tax deduction generated by such participation. It
follows that taxpayers who no longer enjoy the benefit of those large deductions are no longer "participating ' in the listed transaction. But that is not the end of the story. Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years. While the regulations do not expand on what constitutes "reflecting the tax consequences of the strategy", it could be argued that continued benefit from a tax deferral for a previous tax deduction is within the contemplation of a "tax consequence" of the plan strategy. Also, many taxpayers who no longer make contributions or claim tax deductions continue to pay administrative fees. Sometimes, money is taken from the plan to pay premiums to keep life insurance policies in force. In these ways, it could be argued that these taxpayers are still "contributing", and thus still must file Form 8886.
It is clear that the extent to which a taxpayer benefits from the transaction depends on the purpose of a particular transaction as described in the published guidance that caused such transaction to be a listed transaction. Revenue Ruling 2004-20 which classifies 419(e) transactions, appears to be concerned with the employer's contribution/deduction amount rather than the continued deferral of the income in previous years. This language may provide the taxpayer with a solid argument in the event of an audit.
Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters. He writes about 412(i), 419, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio's All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education's CPA's Guide to Life Insurance and Federal Estate and Gift Taxation, as well as AICPA best-selling
books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or visit www.taxaudit419.com or www.taxlibrary.us.
The information provided herein is not intended as legal, accounting, financial or any
other type of advice for any specific individual or other entity. You should contact an
appropriate professional for any such advice.
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FBAR - What are You Hiding?
FBAR/OVDI LANCE WALLACH: FBAR-What are You Hiding: The collapse of Swiss bank secrecy, the IRS settlement with UBS, the criminal investigation of HSBC and the related IRS voluntary disclosure
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LANCE WALLACH Newsletter
FBAR/OVDI LANCE WALLACH: Check out my #constantcontact newsletter: Check out my #constantcontact newsletter
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FBAR Offshore Bank Accounts and Foreign Income
FBAR/OVDI LANCE WALLACH: FBAR Offshore Bank Accounts and Foreign Income Att...: FBAR Offshore Bank Accounts and Foreign Income Attacked by IRS
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FBAR & International Tax Alert Report
FBAR/OVDI LANCE WALLACH: FBAR & International Tax Alert Report: The willful failure to file the FBAR report or retain records of your foreign accounts can potentially lead to a ten-year prison sentenc...
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Captive Insurance Arrangements Are on the IRS Radar
Lance Wallach
Large or small, captives must be formed for the right reasons, their premiums must be appropriate and their business plans must involve genuine insurance, captive experts say.
To Read More Click Link
Large or small, captives must be formed for the right reasons, their premiums must be appropriate and their business plans must involve genuine insurance, captive experts say.
To Read More Click Link
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Captive Insurance - More You Should Know
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412i and 419 Plans: Reportable Transactions
412i-419 Plans: 412i-419 Plans: Reportable Transactions & 419 Plan: 412i-419 Plans: Reportable Transactions & 419 Plans Litigation: CJ: Reportable Transactions & 419 Plans Litigation:
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Faculty Information
INFORMATION:
- PRACTICE AREAS: Tax
- WEB SITE: http://www.vebaplan.org/
BIO:
Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Pubic Radio’s All Things considered, and others. Lance has written numerous books including Protecting
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Benistar, Daniel Carpenter, Donald Trudeau, Molly Carpenter
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Benistar Retiree Benefits, GAIL CAHALY against BENISTAR PROPERTY EXCHANGE TRUST COMPANY
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Lance Wallach - Google
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412i Plans | IRS Resoulution Services
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April | 2016 | 412i Plans
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230 Hotspots: Lance Wallach Life Insurance: Why You Should Stay Away from Section 79 Life Insu...
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